My Debt Diary

How do we get into debt?

Here on My Debt Diary I talk a lot about what I’m doing to get out of debt. Everything from putting together an emergency fund, saving money and making extra money to make sure that my debt total goes down as quickly as possible. The same goes for the debt free community as a whole. What we don’t discuss so much, is how do we get into debt in the first place.

I reached out to a handful of fellow money bloggers who each have their own story to tell when it comes to debt. Whilst debt is equally horrible for each and every one of us, no two of these stories are the same. Instead of surrounding them with a narrative, I am going to leave each blogger’s words as they are.

 

Perry Wilson from Stupid is the Norm

“I’ve been in crap loads of debt and been bankrupt after a customer went into liquidation owing me £44,000. Had the BMW’s and luxury yacht holidays all on ‘chucky’. I got into debt to impress people who didn’t actually give a toss. Stupid Is The Norm apparently.”

 

Victoria from LyliaRose

“Before I hit 20 I got into serious debt (£17500) and hit debt crisis. It was all irresponsible and personal debt from a bad shopping addiction and depression. I was always trying to make myself happy, but made things a lot worse. I spent 5.5 years on a debt management plan paying it back.

Unfortunately I am now in debt again in my 30s, but I can afford to repay this. I took out a home improvement loan a few years back after buying my first home that needed totally doing up and I’ve recently got a 0% credit card to pay over £3000 for dental work I need done this month. Though I’m in debt again I can afford the repayments this time and it doesn’t feel so irresponsible as it’s actually paid for an investment.”

 

Claire from the Money Freak

“I started getting into debt when I had to give up my job to look after my disabled son. Taking him to his appointments weekly in various places (often a few hours journey away) was a killer financially.”

 

Francessca from From Pennies to Pounds

“I went into debt over stupid things…I basically had no money due to an unsupportive spouse who wouldn’t let me leave the home to work or help pay for childcare costs so I was stuck in the house with my baby and would scroll through social media…as always happens with that, I wanted what the influencers had and couldn’t see why my daughter shouldn’t have the same things and opportunities as others just because of her Dad.

I had depression at the time which didn’t help as I didn’t really think things through rationally – I had never been in debt before and I won’t ever again.

Oh and a bit went on my wedding as I had to pay for basically all of that myself too! I soon realised that it was a silly mistake and I wouldn’t be able to pay it off, but I turned to earning extra cash from home and managed to pay it off all by myself. (And now I’m getting divorced)”

 

Mel from Mels Money Mindset

“My story is actually my partner’s story. When I met him, his dad had died about 6 months beforehand and he left his well paid job to move back in with his mum (she lived about 4 hours from where he was living at the time).

He just went crazy with the credit cards. As well as drawing out cash on them for things they did need like food and to pay bills, he also started buying things he didn’t need…for example 4 x DVD players! By the time he got regular work again it was too late – he was up to his neck in debt and it soon got to the point where he couldn’t even afford the minimum payments because of all the interest charges and late payment fees.

It took us a couple of years of hard graft and some serious negotiation to get him out of debt, by which point we were living together and had a baby on the way and to this day we will not have a credit card again. We’ve been debt free over 10 years now, but I still worry about it, even though we are in a much better place financially. In the wrong hands credit cards or loans can be dangerous.”

 

Eileen from Your Money Sorted

“I went into debt at college, because everybody else seemed to be living off their overdrafts and student loans! I decided that being sensible with money, saving it up from my summer job to see me through the year, was boring, and I would just “join the club”.

While it meant that I could spend wildly, and have a blast in my final year, it also meant that I finished my degree with unnecessary debts. I absolutely detested the feeling of getting paid, but still being in the “red”, so I vowed once I had my overdraft paid off, that I would never be in overdraft again. And I have stuck to that vow!”

 

Chermaine from ChammyIRL

“I made the silly mistake of taking a loan out for someone else. Six months later he stopped paying me and I started struggling to meet payments, more money was borrowed to help me get by and it snowballed from there. Never did get the rest of it back but all debt is now fully paid off.”

 

Whether we get into debt in an attempt to keep up with the Jonses, because we don’t have the maturity to understand what could possibly go wrong, or because of the challenges that life throws at us, we all have one common goal and that is to be debt free.

I’d like to thank all of those who contributed to today’s post. Talking about debt is difficult and it is something we all need to do more often.

You can read about my own debt story here.

 

 

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How to handle debt when you can’t afford the minimum payments.

This is a guest post by Sara Williams. She is a debt adviser and runs the Debt Camel website which looks at everything to do with debt, from getting a payday loan refund to checking your credit rating before applying for a mortgage.

Emma is clearing her debt using the snowballing approach. That’s great – it lets you pay off your debt fast and also results in you having a fantastic credit rating at the end.

But snowballing only works if you can make at least the minimum debt repayments each month. So Emma asked me to write about what to do if you can’t afford the minimum payments.

Don’t “Rob Peter to pay Paul”

First what not to do…unless your problem is genuinely short term, you have to stop and not borrow any more money.

Don’t get a new credit card, or a larger overdraft or ask your mum to lend you some. That is known as Robbing Peter to pay Paul – and it often ends very badly when you have much larger debts and nowhere left to turn to.

If you are hoping to get through the next month or two, is it because your problem is really temporary? If you are just about to start a new job but your first pay packet is 6 weeks away, or your childcare costs are about to drop, or you only have three payments left a large loan then Yes, it really is.

But if the problem now is the electricity bill, but next month it will be new shoes for the children, then there is Christmas… that is a long term shortage of money showing up in different ways every month or two.

What sort of debts do you have problems with?

Debt advisers divide debts into “priority” and “non-priority”. I think most people would agree that rent and mortgage arrears are top priority, but some of the other ones may surprise you – read What is a priority debt? and think if you have any.

If you do, then you need to talk to a debt adviser. Even if your main problem at the moment feels like a credit card bill, if you have priority debts it’s best to get expert help as soon as possible.

Where to get help when you can’t afford the minimum payments.

I have a list of great places for debt advice, depending on where you live in the UK, if you would like to talk on the phone or face to face, whether you are self employed etc. All the places in that list are not for profit organisations who will be sympathetic and talk in confidence.

Don’t worry that your problem isn’t big enough to bother a debt adviser with – debt advisers would rather talk to you sooner when your problem is easier to solve!

And don’t google for debt advice! If you do you will end up talking to firms that have paid Google a lot to get high up in their rankings. And that means they are planning on making a lot of money out of you, even if they say they are “free”.

Ask your creditors to freeze interest – the DIY option

From here on I am going to assume all your debts are non priority.

How much money do you have that you can pay to your loans and credit cards each month? If you work through National Debtline’s My budget that will suggest what you can afford to pay to each of these debts.

When you can’t afford the minimum payments, you can phone the creditor and explain your situation:

  • say you can’t afford the normal payment;
  • offer an amount you can afford; and
  • ask them to freeze interest and not add extra charges.

It doesn’t matter if you can only afford £1 a month – this is known as a token payment.

If you have a lot of creditors, or you can’t face making these calls – talk to a debt adviser. A debt management plan, where the interest is frozen on your debts, could work well for you.

Is freezing interest enough?

If getting the interest frozen on your debts won’t be enough to repay them in a reasonable time, a debt adviser can also look at your other options.

What is “reasonable” here depends on you and how your situation may change.

If you are trapped in a long term problem that really isn’t going to get a lot better, there are a range of insolvency options that a debt adviser can explain to you. You may not want to go bankrupt, but staggering on for another few years and then having to is a worse choice. And there are other possibilities such as a Debt Relief Order (DRO) that you may not have heard about.

This post was written by Sara Williams of the Debt Camel. 

 

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I went to the cinema for 70p | Five Frugal Things August 2018

In an effort to pay off my debt as quickly as possible, I’m looking beyond simply making extra money. I have been assessing all of my spending habits, adopting a more frugal lifestyle wherever I can. Each month I will be sharing Five Frugal Things that I have done to help improve my finances and ensure I can reach my goal of becoming debt free as soon as possible.

One

Baking instead of giving into the temptation of the shops down the road. We have a very handy corner shop down the street that takes me about a minute to walk to from our front door. It’s so handy to pop down if you’re out of milk or guests come over unexpectidly. It’s also great when you really want a bar of chocolate or a packet of crisps. Ok so I would normally only spend £1 each time, but if I’m going once or twice a week the cost soon adds up.

This month I stopped myself. I had a huge craving for something, anything sweet one day. We had two overripe bananas in the fruit bowl so I took 15 minutes out of my morning and made a banana bread. In fairness I had to pop out and get a stick of butter which cost me 69p, but the loaf I made with it kept my cravings at bay for several days and I still have some butter left to make something else with if I choose to. Some money saved and my sanity remains in tact…for a while at least.

Two

Spending more on clothes. Wait, what?! Hear me out on this one. Since I was a student at university I have been in the habit of only buying clothes from cheaper shops. In particular, I would always get my jeans from either Primark or Asda. They fitted well and only cost about a tenner, to me it was a bargain.

What I have come to notice though, is that the amount I pay is definitely reflected in the quality. After around 6 weeks the threads would start to wear and I’d be replacing them just a couple of months after purchase. I made the decision this month to begin spending more on clothes, buying better quality and therefore having to buy less often. In the long run I’ll actually end up spending a lot less.

Three

We are making our own wedding cake. Well…if all goes well we are making our own wedding cake. After trawling the internet for an affordable cake option, I have come to the conclusion that we either have to pay a high price or make it ourselves. I understand of course that cake makers, along with any other business owners have to pay themselves well for their craft. For us the cake is more of a tick box than a priority and this is why we are looking for a cheap alternative.

This week we did a trial run with a Madeira cake. It tasted great and would be a really sturdy option, but it took almost three hours to bake one layer so I think we need an alternative that will cook faster. The cake will most likely have to be baked the day before the wedding, maybe two at the most, so it needs to be a little more time efficient. Vanilla sponge is up next…watch this space.

Four

Blankets over boilers. For the first time in months I have had the urge to put the heating on. It seems mad considering the summer we have had and the fact that it’s still August, but it has been so cold today. Instead of giving in to the cosy joy of the heating, I opted for my favourite blanket. I am writing this post on a Sunday, so naturally it was only sensible to stay firmly tucked under the blanket on the warm couch…well I didn’t want to catch a chill.

Five

I went to the cinema for less than a pound. Yes, you read that right. You know what’s even better? That bought two tickets. TWO. This isn’t a wind up. Last week my fiance realised he had reward points with Natwest, redeemable at Cineworld. It was Wednesday and we also have access to the 2-4-1 offer thanks to our insurance. Add both offers to the checkout and the total was 70p.

To top it off we already had some snacks in the house in the form of the aforementioned trial wedding cake and we opted for some own brand flavoured water, so drinks came to 74p. We ended up spending £1.44 in total on an evening that could have easily cost £15 or more. We were both very happy with that one!

 

There they are, my Five Frugal Things for the month of August. As this was my first month of making a real effort to be more frugal it has certainly been a challenge but I have learnt so much in the process!

I’m linking up with Cass  Emma and Becky in this week’s Five Fabulously Frugal things I’ve done this week linky.

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Debt Payment Progress Report 4

Every two weeks I will be sharing my debt payment progress report with you. I’ll share my new debt total and all of the things I have done to make this happen. I think this is important for two reasons. It will help me record my journey and share with you what works and what doesn’t. It will also help me to stay motivated!

My new total!

As of August 17th 2018 my new debt total is £16,095.85 (My starting debt total was £16,814.29)

In the last two weeks I have paid off £147.75. It’s smaller progress than last week but look how close I am to getting under £16k! I will absolutely smash through that in the next two weeks. That makes me so happy.

(I should note that I have paid in more than this, however some money has gone straight to interest. This is why the numbers below are larger than the net amount that I have paid off. I have also been putting money into an emergency fund.)

My new total debt payment to date is now £718.44, which I have calculated to equate to 4.2% of my debt total.

debt payment progress report £16,095.85

If you read Wednesday’s post you will know that I completed my emergency fund. That means two amazing things. Firstly, I am now officially in baby step 2. Secondly, all of my budget (following bills, expenses etc) will now be directed at my debt. The debt snowball is well and truly underway. I’m excited to see my progress in another two weeks!

You can find my previous reports here:

Finance Book of the Month – Money and Mindfulness: Living in Abundance

As I make progress towards becoming debt free, I am making it a priority to educate myself more about money. I want to have a better understanding of handling finances, financial mindsets and many other useful topics. My favourite way of doing this is reading. This is a part of my journey that I’m particularly keen to share with you as I believe you could get a lot of value from it. Here is my finance book of the month.

Finance book of the month – Money and Mindfulness: Living in Abundance

This week I would like to share a book that I first read around three years ago. I don’t believe that it is well known in the debt free community, however I think that it is incredibly relevant.

Lisa Messenger, the author, is the founder of the global brand the Collective and launched a magazine that has been sold in 37 countries. It is deemed an incredible success and has made an outstanding profit…and she funded it entirely from her own pocket. I should add that Lisa did not come from money, she just found her own way of doing things.

Lisa demonstrates that normal is not always best. After all debt is “normal”, and we all know how we feel about debt!

At the very beginning of her book Lisa challenges the taboo of talking about money, and this is what first drew me in. For those of us in debt, the thought of having an open discussion about it can make your knees shake. Following our debt free journey what then happens when we find that our financial health continues to grow? Perhaps we begin to do rather well with money and become what is considered “well-off”. Would we be OK talking about money then? Well of course not, that would be boasting.

Lisa explores this ridiculous attitude that the world has towards money and encourages us to think positively about it. It is OK to have it, it is OK to enjoy it and it is OK to want more! In one of the opening pages of the book she states “I love money, not because I dream of having a driveway full of fast cars and a closet full of designer outfits…but because the moment I stopped seeing money as the root of all evil and saw it as a fuel of fulfilment, everything changed for me.”

As a result of such a negative experience with money, many of us may struggle to come out of the debt cloud with a positive outlook towards the wealth that we may be about to build. Money and Mindfulness opened my eyes to having money as a positive thing. It also suggested that the goals we set for ourselves and our finances in the future are entirely achievable, whether that means having a comfortable amount in your bank account or earning millions. You don’t need loans from the bank or years of experience in business. What you need is a level head and a healthy attitude about success.

Currently, I see very little of my income go towards enjoyable spending and the concept seems so foreign. As we move towards becoming debt free, it is so important to become familiar with having money that does not disappear straight into a credit card payment or loan. The transition might be a tricky one for a lot of us, but this sort of preparation will be a big help!

You can find Money and Mindfulness: Living in Abundance here on Amazon. (This is an affiliate link. I receive a small commission at no extra cost to you if you choose to use it. Thank you!)

 

I absolutely encourage you to begin reading (or listening to audiobooks) as part of your debt free journey. Not only do you learn something as a result, but it also allows you some time to switch off from your debt and all the other goings on in life and just focus on the book in hand.

You can read my previous Finance Book of the Month post here.

Finance Book of the Month - Money and Mindfulness Living in Abundance - Pinterest

 

Simple Money Saving Methods – Skimming

When it comes to saving money, it is not always possible to squirrel away large amounts from every pay cheque. During a debt free journey in particular, priority is given to debt payments. With the exception of the emergency fund, it is challenging to find spare change to save. As such more flexible and simple money saving methods are necessary. One of my absolute favourites is skimming.

What is skimming?

If you’re not familiar with the term, skimming is the process of checking your bank account on a regular basis, at the end of the day perhaps, and transferring the odd pennies or pounds across to your savings.

As an example, if your bank account has a balance of £36.49 in it, you might choose to transfer 49p across into savings. This is particularly easy to do if you use an online banking app. I would definitely suggest checking to see if your bank offers one.

The benefits of flexibility

The great thing about skimming is that you are fully in control. Each time you put your money into savings you decide how much is transferred. This gives you the flexibility to decide on an amount based on the way your day, week or even your month is going.

It may be that you’re in the middle of a month filled with birthdays, your car tax is due and your car’s MOT is looming too. It’s likely to be an expensive month and so you would keep your skimming amounts to a minimum. Pennies would still be moved into your savings account, but really you need all the money you have this month.

On a quieter month however, that might change. No big plans are in the diary and you feel far more relaxed about your expenses? You may choose to skim larger amounts this month. Instead of moving pennies, you might even move pounds. Try rounding your account balance to the nearest £5 and you will see your savings total rise very quickly!

The same is also relevant to your income level of course. At the moment, you may find yourself very stretched and panicking about ever finding “spare” money to save. You just don’t have it! Begin by skimming pennies. Your balance is £24.63? Skim 3p. I know it sounds ridiculous. How can that possibly add up?! It will, I promise. Begin there and then adjust as your debt goes down and your budget relaxes.

How much can I save?

Skimming is an effective way to save because your are transferring small amounts of money on a regular basis. Say for example you skim and average of 50p each day. In one week that would add up to a total of £3.50, enough for a coffee. In one month you would have £15.00 in your savings account. That’s a small amount, but it’s growing.

Let’s go a little further. After one year of skimming 50p each day, your total will now have reached £182.50. Now that to me, is a good amount of money. Do some maths with your own finances. How much do you think you can reasonably skim on a daily basis? Don’t set it as a strict goal, just have a look.

What about when you reach a more comfortable stage with your finances? You decide that you are actually able to save £2.50 on average each day. In one year, this would become £912.50. That really is a significant amount of money. That would completely cover Christmas for most families, or buy a lovely holiday. The compound effect is an amazing thing.

 

Take a moment now to look at your account and skim some pennies. Then come back in a month and let me know how you’re getting on!

 

Once you have grasped skimming you should take a look at this post. Emma from Emma and the Girls has written a great post on 18 ways to save money in 2018. If you’re a student in particular, check out this post from Student Skint!

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Debt Payment Progress Report 2 – 20/07/18

Every two weeks I will be sharing my debt payment progress report with you. I’ll share my new debt total and all of the things I have done to make this happen. I think this is important for two reasons. It will help me record my journey and share with you what works and what doesn’t. It will also help me to stay motivated!

My new total!

As of July 20th 2018 my new debt total is £16,492.32 (My starting debt total was £16,814.29)

In the last two weeks I have paid off a total of £170.71. At first when I worked this number out I was disappointed. It’s only slightly higher than my efforts last week and it’s such a small amount in comparison to my total. It’s still an amount though and that is what’s important! I’m still reducing my debt.

(I should note that I have paid in more than this, however some money has gone straight to interest, which is why the numbers below are larger than the net amount that I have paid off. I have also been putting money into an emergency fund.)

My new total debt payment to date is now £321.97, which I have calculated to equate to 1.9% of my debt total.

debt payment progress - 200718

How have I made this progress?

As I am in the early stages of paying off debt I only use a handful of money making and money saving methods at the moment. It is a goal of mine to expand on these in the coming weeks. Here are the ones I have used this past fortnight:

  • freelance work – £225
  • prolific academic – £16
  • ebay sales – £22

Of course my main income method has been freelancing (I’ll talk about this more in a future post) and I have some good news; I’m getting busier again! I mentioned last week how quiet I had been and it was getting to the point of becoming a serious concern, however the work load is now returning to normal.

Projects are still being completed and invoices are still being processed so it will be another week or so before I start to see a little boost in my income but I know it’s coming and that’s what matters. I’m hoping I can may off a larger amount in time for my next debt payment progress report as a result!

Prolific Academic is an income that I have spoke about before so I won’t go into detail again. If you’d like to read more you can find my thoughts in this post here. I have a referral code if you fancy trying it out: click here. I receive a small kick amount of commission from your first withdrawal with no extra cost to you if you decide to use the link, thank you!

Reflections for the next two weeks

I definitely need to stop putting myself down if my total payment for the fortnight seems small. The important thing is that I am making progress. The process of updating you with each progress report is definitely helping my motivation and reminding me that my debt total is getting smaller and that is what matters!

You can find my previous reports here:

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Emergency Fund Saving | My Progress

I’m currently in the process of building a pot of money which I call my Emergency Fund. Not sure what that means? I have a post here that will explain all! Charlotte from charlottemusha.couk has also written this great post that explains the emergency fund really well.

Today I wanted to share my emergency fund saving progress with you. These are the things that have worked for me personally over the last month or so.

Emergency Fund Saving Method

In this post from last week I discussed using survey sites and selling on eBay to make money. Even making small amounts from these can add up very quickly. As work has been so quiet recently these have actually been my main methods for building my emergency fund.

A wardrobe clear out was my golden ticket when it came to eBay. I made sure to be thorough and take out anything I hadn’t worn in a while, including a number of items that still had tags on! I’ve been photographing the items a couple at a time and listing them when I’m watching telly in the evening. I have been averaging around £38 each week in sales. Selling your unwanted items is a great way to find that extra bit of money.

Survey sites are something that I have mentioned over and over again, but I will bring them up once more as I think they’re great. Everyone has their own preferences. I personally love Prolific Academic. The surveys pay well and you never get thrown out. If you click here you can use my referral link.

Another favourite money saving method of mine is skimming. Put simply, it’s the process of checking your bank account each day and moving the extra pennies or pounds over to savings. Say I have £117.39 in my account, I might move 39p over to my savings and leave £117 in my current account. If things are going well with my income I might choose to move £2.39, leaving £115 in my current account. Either way, the money can really add up!

My Emergency Fund

My emergency fund target is £500. This is a comfortable amount for me to save at my current income level. It is also an ideal amount for me as it is just over the total of my bills and debt payments for one month. This means that if I have another particularly quiet period with work I know I will be covered.

My emergency fund total is currently £257.59. I’m just over half way to my goal! This has taken me roughly three weeks to pull together so far. I’ll be sure to share another update once I have completed it.

I hope you have found this short post useful and you are able to use them to get started on saving your own emergency fund if you don’t already have one. As I discussed in my previous post, I truly believe that everyone should have a safety net like this in their bank. We just don’t know what life is going to throw at us!

Laura from the Thrifty Londoner has written a great post on 20 Ways to Make Money with a variety of great ideas!

 

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Finance Book of the Month – The Total Money Makeover

As part of my journey towards becoming debt free, I am making it a priority to educate myself about money. I want to have a better understanding of handling finances, financial mindsets and many other useful topics. My favourite way of doing this is reading. This is a part of my journey that I’m particularly keen to share with you as I believe you could get a lot of value from it. Here is my finance book of the month.

Finance book of the month – The Total Money Makeover

This week I would like to begin by sharing a book I have mentioned many times before already. A lot of you may have already read this, especially if you are also on a debt free journey, but I want to share it none the less.

The Total Money Makeover by Dave Ramsey is what I would describe as the most effective and most sensible approach to debt payment. The book provides you with a straightforward method to handle your money. It is easy to read and to understand. When you are already in stressful situation, possibly even a full on panic about your finances, the last thing you need is the confusion of unfamiliar words and complicated guides.

Dave’s money makeover system is made up of several baby steps, set in a specific order, that help you handle and control your money. He begins with building your emergency fund. I spoke about this here earlier in the month. He then progresses through debt payment, further saving, preparing for retirement and so on.

The Total Money Makeover is not the sort of book you read once and forget about. You will find yourself referencing it again and again. It will be relevant even once you are in the habit of handling your money well. I have just read it for the third time myself. As the title suggests, Dave’s intention is not to help you find a quick fix for your money. The steps guide you into healthy money habits that you will keep for life.

You can find The Total Money Makeover here on Amazon. (This is an affiliate link. I receive a small commission at no extra cost to you if you choose to use it. Thank you!)

https://www.amazon.co.uk/gp/product/1595555277/ref=as_li_tl?ie=UTF8&camp=1634&creative=6738&creativeASIN=1595555277&linkCode=as2&tag=mydebtdiary-21&linkId=b5421f231e544a87201db271924def21

The Total Money Makeover by Dave Ramsey

https://www.amazon.co.uk/gp/product/1595555277/ref=as_li_tl?ie=UTF8&camp=1634&creative=6738&creativeASIN=1595555277&linkCode=as2&tag=mydebtdiary-21&linkId=b5421f231e544a87201db271924def21

The Total Money Makeover by Dave Ramsey

I absolutely encourage you to begin reading (or listening to audiobooks) as part of your debt free journey. Not only do you learn something as a result, but it also allows you some time to switch off from all the other goings on in life and just focus on the book in hand, literally.

Claire from The Money Freak reflects on her own experience of discovering Dave Ramsey and his method in her blog post here.

 

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Beginning a Budget – When you have an irregular income

Two weeks ago I shared this post, You Need a Budget, and discussed the difficulties I was having as someone who has an irregular income. After some research and trial and error I have come up with a method that seems to be suiting me well. It is basic and very flexible as you will see, but it works. I imagine it will change over time but it is definitely a good start. These are my thoughts on beginning a budget.

Beginning a Budget

To get the ball rolling I did a lot of reading on different methods used by bloggers, authors and other financial advisers. For those of you who, like me, have an irregular income you will find that trial and error is the only way to discover what really works for you personally. You need an adjustable budget that shifts with good and bad months of income.

Some months will naturally pay better than others. This can make even the simple act of writing a standard income figure nearly impossible. A good place to start would be to find your income average from the last 12 months. This will give you a fair guideline amount to work with.

As a starting point, no matter your income type, I would highly recommend the Total Money Makeover by Dave Ramsey and more specifically his app called Every Dollar. This app allows you to set up your budget as well as keeping track of your baby steps. This is ideal if you’re on a debt free journey!

Tracking my Income

Most of my freelance clients pay within a couple of days to one week of an invoice being sent. It is therefore possible for me to plan for my income around one or two weeks in advance of payment. I simply keep a running note of work in progress or work due to arrive and an estimate of the payment date for that project. All of my invoices are stored in one place, meaning that I always have an idea of what’s due.

As an example, in one week I might invoice for three different projects which come to a total of £450. I know they will be paid into my account in three days time as this is the agreement with my client. This total is now an income value that I can use to handle my outgoings.

There is always a risk of payment problems and delays can happen. As I work with such a short window, numbers can rise and fall quickly. This is why I recommend having an emergency fund in place. If a bad month happens, I’m not in a panic.

My method of keeping track of my income is very basic and lacking in sophistication, but it seems to work.

Tracking my Outgoings

My budget is split into two types of outgoings that I need to keep track of. There are the set outgoings such as bills, my car insurance, my phone and my loan payments which are defined amounts withdrawn on certain dates. These don’t change and so they are straightforward to track.

I always have a note of these payments in my diary to ensure I never forget them. I also keep a note on my phone of the next payment due, which I update each time a payment is made. This is just an extra measure I take to make sure that I am always on top of things and nothing takes me by surprise.

Collectively, my personal set monthly outgoings come to just short of £450. As part of my budget strategy I therefore always keep £500 available in my account. This gives me piece of mind knowing that everything is covered. When some money goes to a bill and the total drops, I top it back up to £500.

For the not so regular outgoings, my approach is very simple. I think before I do. These outgoings are normally made up of things like nights at the pub, popping to the shops and trips home to Glasgow. Budgeting money for these is all about staying in control and planning ahead.

Take a trip home to Glasgow for example. I normally plan these a month or so in advance. I know that petrol for my drive normally comes to £60 for a round trip. This can be a lot of money when it has been a slow month. Planning ahead makes it manageable as I can prepare for it and set the money aside.

For the smaller things, I look at my expected income and upcoming payments and decide if I want to and more importantly NEED to spend that money. Would it be more sensible to keep it back for another day? If the answer is yes, that’s what I do.

Telling each penny where to go.

So where does everything else end up? This is the stage in a budget where many people falter. They know their outgoings are covered so what more is there to worry about? In fact, this is a key point that Dave Ramsey highlights over and over. If you don’t tell your money where to go it will disappear.

If you are looking to save, use this “extra money” to save, if you are looking to pay off debt this is where to place your focus!

Once my account reaches £500 I have to tell the rest of my income where to go. For me, a small amount goes to savings. Currently, at time of writing, I am building my emergency fund so this is my focus right now. When this is complete this money will go straight to debt payments. For this I will use the debt snowball method, which is a topic for another post.

I’m incredibly excited for the day when I can change my budget entirely, moving from debt payments to investment and savings. It’s a long way off at the moment but I will be sure to share that change with you when it happens!

 

Budgeting can be overwhelming when you are first beginning your financial journey. The best first step to take is to note down as much as you can and open your eyes to what is going on with your money. Where is it coming from and where is it all going?! When beginning a budget use a simple system that suits you to get started and make your way towards financial freedom!

You can find a fantastic in depth guide with more advice on writing a budget over on themoneyfreak.co.uk.

 

I’m taking part in the Monday Money linky with Lynn from Mrs Mummy Penny and  Faith from Much More With Less

beginning a budget - when you have an irregular income