Sinking Funds- How to save for large expenses

When sticking to a budget (If you need help writing a budget, you can find that here ) my biggest priority after paying for my fixed expenses, is to contribute to my Sinking Funds (SFs). This is because SFs stop me from acquiring more debt.

In this blog post, I’m going to talk all abut SFs, what they are and how I use them.

What are Sinking Funds?

Essentially, all of the things that you expect will happen at some point, are covered with small amounts of money that you put away into an account every month.

I like to think of Sinking Funds as lifeboats on a sinking ship. All is going well, you are sailing along quite happily on your debt free journey, your budget is running smoothly, you are paying off your debts using your Debt Snowball (or Avalanche), when BAM! All of a sudden, you hit an Iceberg. That Iceberg may be a broken down car, or School Uniform costs, or whatever the case may be.

What Sinking Funds do is take away that panic of hitting the iceberg. So you aren’t left panicking about how you are going to cover that expense. In reality we know these things WILL happen at some point. Its unheard of for you to buy a car and NEVER spend a single penny on it and then sell it 10 years later. All cars need money spent on them, whether its expected or unexpected. The same goes for lots different categories.

Some examples are:

Christmas- It’s on the 25th December every year, plan for it!

Birthdays-Similar to Christmas, birthdays are

School Uniform Costs

Car Maintenance/M.O.T

Pet Expenses

Home Repairs

Clothing.

 

How to start Sinking Funds

The general rule of thumb is to work out what Sinking Funds you need, then work out how much you’ll need for each fund, divide by 12 and save that amount every month.

So, if you’ll need £250 a year for car repairs, you’ll divide that by 12 (approx.£20.80) and save that amount every month throughout the year.

Where that may not work is when you’ve only just started SFs and you have a shorter time to save for expenses. For example, it’s September and you haven’t any SF for Christmas, or is August and you haven’t any SF for School Uniform costs.

In that scenario, I would work out the BARE MINIMUM you can get away with spending for that item, and save for that first. It may mean having to scale back significantly on Christmas for example. In 2017, I only spent £250 on Christmas in total. I never thought that was possible, but I managed it. And I’m sure you could manage on an equally low budget, if push came to shove.

 

At What stage to I set up Sinking Funds?

If you are following Dave Ramsey’s Baby Steps (as I do) then you will start SFs once you are in Baby Step 2 (paying off your debt).

This is not something that you ever stop doing either, it will continue to serve you for the rest of your life.

Where do you keep your Sinking Funds?

 

It’s really up to you. I keep mine in a separate bank account, and transfer the money to them every month. I don’t have them in a high interest account, I just have them in a cash ISA that I can withdraw from quickly when I need to.

I know of some people who keep their Sinking Funds in cash in their house. If you are going to do this, I highly recommend checking with your house/contents insurance to see how much would be covered by them in the event of an emergency (fire, robbery etc).

 

I hope that helps!

Claire.

 

 

 

 

 

 

How to Write a Budget

 

 

Before we get into the nitty gritty of HOW to write a budget, first of all I think it’s important to explain why we might NEED to write a budget.

If we are aiming to pay off debt, or even if we are debt free but seem to have little to no money left at the end of the month, we are going to want to know exactly where our money is going. In the words of Dave Ramsey, ‘We need to TELL OUR MONEY WHERE TO GO, instead of wondering where it went’.

If you’ve ever attempted to write a budget and on paper it says you should have £300 a month left over, but you never actually do, you need a budget. In fact, whether you’re in debt or not, I believe that everyone needs a budget! Having a budget enables us to pay off debt faster and more consistently, build savings and invest more.

With that being said, lets look at the steps we need to take when writing our first budget.

Before you start:

-Make sure you have an hour or so when you won’t be interrupted. Don’t do it when you are in a rush or stressed. Not only will it become a hassle to even start writing a budget, but you’ll also miss out things because you are not focused.

-Get all of your paperwork together. Namely, your last 3 months bank statements. This is so you can look back on your expenses and Income to have a baseline from which to start, and also see what dates your Direct Debits and other payments come out.

It may also be handy to have your payslips for the past 3 months, although you may be able to get that info from your bank statements if you are paid via BACS.

-Make sure you include income and expenses for not just yourself, but also your husband, wife, children, pets and anyone else that you are responsible for.

 

First steps:

-To work out how things stand before writing your first budget, I recommend this online Budget Calculator from the Citizens Advice Bureau  https://www.citizensadvice.org.uk/debt-and-money/budgeting/budgeting/work-out-your-budget/budgeting-tool/  as it will prompt you for what to include and you can print and save the results.

This will give you a basis from which you can write your first proper budget.

Once you have filled in the Budget Calculator above, you’ll get 1 of 2 outcomes; your income is LESS that your outgoings, or your income is MORE than your outgoings.

 

What if I have more outgoings than Income?

The good thing about writing a budget is that you can see where all of your money is going, and more importantly, where your money is being wasted. So, if your outgoings are more than your income, you either need to increase your income or decrease your expenses.  For many people, the easiest category to cut down on is the food budget. Meal planning definitely helps with this, and you can see how I meal plan here http://themoneyfreak.co.uk/2018/04/01/how-i-meal-plan/

 

Now you can write your new budget.

Work out if you are going to write a weekly, 2 weekly, 4 weekly or monthly budget. This is individual to every person and will probably depend on how often you get paid. I get paid 4- weekly as well as monthly, so I do a fortnightly budget.

Be realistic! If you have been spending £800 a month for food, reduce it slowly. Don’t decide that the new food budget will be £300 a month. You’ll end up throwing in the towel and blowing the budget. Maybe decrease it by £50 for the first month and again by £50 the next month.

Don’t over complicate it. Just a piece of paper with Income on 1 side and Expenses on the other is perfectly fine. I’ve been budgeting for almost 2 and a half years and still use this method!

It is 100% normal not to get your budget right the first, second or even third time round! If you forget something the first month, just add it in to the second months budget so you don’t forget it again. Don’t give yourself a hard time about it, you are learning!

Budgets are fluid and they regularly change. The budget that you write this month may not work for you 6 months from now, or even 3 months from now. As your job, situation and family changes, so will your budget. I’ve had to change mine as children have left education, when we’ve added a new pet to the household and our diets have changed. There may be many other reasons why your budget will change from month to month.

For those of you who have an irregular income, Emma over at My Debt Diary has a great blog post on how to write a budget here

Once you’ve written your budget, how on Earth do you stick to it? To see what helps me, read my post http://themoneyfreak.co.uk/2018/04/20/how-to-stop-spending-when-paying-off-your-debt/

 

 

 

 

 

 

 

 

 

How to Stop Spending When Paying Off your Debt.

 

When I was paying off my debt, it seemed that no matter where I looked, other people around me were buying all the things they wanted, whenever they wanted! Sometimes it really tempted me to splurge, or even worse, to get my credit card out and abandon my Debt Free Journey altogether. Especially as I knew this would continue for 2 years while I was working hard to get out of debt. Nobody has an iron will that lasts for 2 years, so it was inevitable that at some point I would crack!
It was pretty early on that I realised that I had to come up with some ways to avoid that temptation altogether, or I would end up spending more than I had and getting into even more debt.
So, I came up with these 10 rules on what to do to avoid temptation while paying off debt.
Know Your ‘Why’
This is probably the most important thing that you can do while you are paying off your debt. Unless you have a really good reason for doing this, you more than likely won’t be able to stick at it for long.
You may already think that you know your why, but maybe ask yourself what it is about your Why that motivates you to work towards being debt free? For example:
I want to get out of debt so that I have more money. Why do you want more money?
So that I can save it instead of using it to pay off debt. Why do you want to save it?
I want to save money so that I can buy a house. Why do you want to buy a house?
To have financial security…And the questioning continues.
What was originally ‘I want to have more money’ is developed further. Only then will you know your true ‘Why’.
Give yourself some fun money so you don’t feel deprived
Nobody can live without any sort of ‘treat’ long term.  Allow yourself some ‘fun money’. This an amount that you put in your budget every month that you get to spend on what the hell you want. I’m not talking £500 to buy a new armchair though! It’s more like £30 a month to buy a new lipstick, or go to the cinema, or £10 a month to spend on a new book every month.
How much you get to spend every month will be determined by how much your income is, how much debt you have and how quickly you want that debt gone.
If you need help working this out, you’ll need to write a budget. See my post ‘how to pay off debt while on a low income’ for information on how to do this.
Unsubscribe from newsletters or emails from your favourite stores
Personally, I could not cope with seeing all of the sales and offers that were on at my favourite shops. It felt like I couldn’t escape from being sold something, even in the comfort of my own home! So, I unsubscribed from every shop that tempted me, which was pretty much all of them.
As well as unsubscribing to these emails, I also deleted all the payment details that I had stored on all of the places I normally shopped online. From supermarkets (Tesco, I’m looking at you) to Amazon. I deleted all of my payment cards. While that doesn’t stop you from actually visiting the site, it makes checking out and paying for anything significantly more time-consuming. If you are anything like me, that will be enough to make you not bother spending.
Don’t visit the shops!
This is a fairly obvious one, but if you don’t want to spend any money, then don’t go to the places where spending is not only easy, but pretty much encouraged. For some of you (and I speak from experience here!) going to the local Mall or High Street has become part of your weekend routine.
 I used to head to my local Mall, go straight to Starbucks, grab a coffee, then walk around the shops. I’d easily spend upwards of £70 and come away with not much to show for it.
These days I find something else to do, preferably something with no cost attached. In the nicer weather I’ll head out into the garden and potter about, or I’ll take my dog on a nice long walk.
Just find a free activity to replace that Saturday morning routine and save the Mall trips for when you actually NEED something.
Hopefully these tips will help you as much as they helped me. It can be so hard to resist the urge to spend, especially when your friends and family are spending money without worrying about it.
But just keep your eyes on the prize, it’s worth it. I promise!

How I meal Plan.

One of the main things I’ve always struggled with, even while working towards getting out of debt, is keeping the food budget in check.
I have 2 teenage boys, and as anyone with teenagers will tell you, they are expensive to feed!

I could (and often did) easily spend £500+ a month on food. But when trying to become debt free I knew I had to tackle this, as it was my biggest expense every month and I hated seeing so much money being spent on it, while food was also being wasted.

So I did what I suspect anyone does in this situation, I had a look on YouTube and watched what everyone else was doing. But to be honest, I didn’t find many meal planners that I could relate to, and definitely none who had dietary issues ( my older son has smell and texture issues with food).

So I needed to come up with a way that worked for me and my family. I developed these really simple steps, and I hope they help you too.

1. Work out how much you want to spend

The first thing I did was work out what was a acceptable monthly food budget for the 3 of us, taking into account how much I wanted to put towards debt, how much my monthly expenses were, and how much food we normally wasted.
I settled on spending £100 per person, per month. So £300 a month. Over time I’ve managed to get this lower, but just concentrate on spending £20 less than you were each month.
This may be more or less than what other people are spending for their families, but as long as it’s less than what YOU have been spending, that’s all you need to think about. There will always be people spending less than you, but comparisons don’t help anyone.

2. Do an inventory.

To avoid food waste, I always try and start by using up what is already in the cupboards, pantry, fridge and freezer before. Not only does this avoid food waste but it saves you money too. I go through the kitchen and write down every bit of food that I have.

3. Write a list of as many meals as you can think of

The next thing I did was to write down on paper as many meals as I could think of that I knew everyone in the family liked. I was aiming for 20, but ended up with 30. When doing this, you want to refer to the Inventory you did, starting with meals you can make from what you have on this list.
This may be something that you need to leave and come back to throughout the day, as I found it quite hard to think of 20 meals just off the top of my head.

4. Look at your schedule for the month/week.

When meal planning, it’s essential to take into account what you are going to be doing for the month/week. On the nights when you are working late, you don’t want to have planned a meal that takes 45 minutes to cook. So what I do is make the quickest meals ( or eat leftovers) on the nights when I don’t get home until late, and make the meals than need  more time and effort of my days off, or on the days when I finish work early.

5. Assign each day a meal

To make this as easy as possible, I make most meals stretch 2 days. So I only have to make 4 meals a week. Any leftovers can be assigned to the days when you don’t get home until late and need to nuke something in the microwave. For example, you could make a Chilli on Monday and have it with rice. Then on Wednesday you could get home from work at 10pm and heat it up in the microwave with a jacket potato and dinner will be ready in less than 10 minutes. Or you can make fish pie on Tuesday and use it to make fishcakes on Thursday. 
 

6. Go shopping

Don’t be afraid to tweak your meal plan slightly if you see good deals. If you planned to make a roast chicken on a Sunday but once you get to the supermarket you find that Turkey is on offer for cheaper, it makes sense to change it. If you planned to have white potatoes but find that sweet potatoes are on offer and work out cheaper, get them instead.
 
 
 
Another way that you could help yourself when it comes to super quick meals, is to batch cook. 
Batch  cooking is where you make extra portions and then freeze. This means you’ll always have home made ‘ready meals’ available for you. Or you can do this with parts of meals, like home made chicken nuggets. I do this quite a lot with mainly mince based meals but need to restock my freezer as I’ve been slacking on this recently! 
 
My favourite meals to batch cook are:
Chilli
Spaghetti Bolognese
Lasagna 
Curry
Stews
Cottage/Shepherds Pie
Hotpot
Pasties
Sausage Rolls
Meatballs
Fishcakes
Nutloaf
Pizza Bases
Cookie dough
 
 
Finally, the main thing thing to remember with batch cooking is to cook, cool, freeze and reheat according to food safety standards. Foods like rice can be tricky when cooling and reheating, so make sure you know the guidelines around items like these.
Nicola, over at mumonabudget also has a wonderful blog post on Meal planning, and I particularly love her use of transparent fridge magnets to organise her meal plan. Read her blog post  to see her tips on meal planning too.
See you next time!
C.
 
 
 
 
 
 
 

How to Stay Motivated on your Debt Free Journey.

When people find out that it took 2 years for me to complete my Debt Free Journey, 1 of the most common questions I get asked is ‘How Did You Stay Motivated For 2 Years?’.

The truth is, I wasn’t 100% motivated all of the time. I think motivation is something we have to work on and accept that it wont always be easy.

Find your ‘Why’. 

I would say that for the first 6 months of my Debt Free Journey, I found it quite easy to stay motivated. The novelty hadn’t yet worn off and paying off debt felt great!
I had a very strong list of Why’s

In my experience, keeping your ‘Why’ in mind at all times is really important. It helps to keep you focused and in turn keeps you motivated.

Get Support

Shortly after the 6 month mark, I started to feel deflated. My friends were booking holidays, redecorating their houses and generally doing all the things that I wanted to do but couldn’t afford.
I could have just said ‘Screw it, I’m going on holiday’ but instead, I used this as a lesson in self-discipline and motivation.

It was DIFFICULT! But I carried on. At that time, I joined some Facebook groups dedicated to people paying off debt and following Dave Ramsey’s 7 Baby Steps. These groups really became my lifeline in the following months. In the end, I started my own Facebook group. This has been so helpful for me to stay accountable, complain when I’m feeling sorry for myself, get advice and share tips.

Mark your progress

This isn’t something that I personally did regularly, but I’ve heard that it can help spur a lot of people on. Many people I follow on Instagram (you can find me at www.instagram.com/the_money_freak ) use Debt Free charts to track how much debt they’ve paid off, and how much they have left to pay. You could make your own very easily if you prefer that.

 

Make Plans

When it killed me to see the majority of my money going towards paying off my debt, I made plans for what I was going to do with that money once I was debt free.
I researched holidays, made lists of household furniture that I wanted to buy, and those plans got me through some pretty tough times!

Some other ways you can make plans are to write down how things will change in your life when you become debt free.
Maybe you’ll be able to work part time, or be a stay at home mum, or be able to save money in the bank for the first time in your life (this was and still is my plan). Whatever it is, focus on that and let it motivate you.

The truth of the matter is, you wont be motivated every single day. I had weeks and months where I just carried on my journey towards debt freedom because I knew that I’d kick myself if i gave up. I carried on despite hating it. I moaned to my Facebook group…but I just carried on. The frustrating times where I lacked motivation always passed, and so will yours.

I hope this helps someone who is struggling with motivation like i was,
Till next time,
C.