Considering cost per joy
I spent my childhood in the countryside and my parents are keen gardeners. So when I was growing up there were always flowers around and flowers didn’t cost money. Occasionally, a guest would bring my mother a bouquet and she would treat this like a huge indulgence. I have memories too of her tutting at the price of cut flowers. She obviously thought is was wasteful to spend on something that was going to die in a few short days.
As an adult I carried this inherited attitude for years. As a reaction to my extremely frugal childhood, I sometimes overspent on clothes and shoes, cocktails and meals out, club entries and gig tickets and, of course, the much reviled “fancy coffees”. I didn’t buy myself flowers.
Sometimes a romantic partner would buy me flowers and I would be overwhelmed and almost resistant. It seemed an extraordinary act. Over time this feeling lessened but it never disappeared. If someone else wanted to throw silly money at flowers for me then that was their choice. To buy my own would be ridiculous. I was someone who would unthinkingly spend £35 on a forgettable lunch, but wouldn’t pay £10 for a bouquet that would make me smile for a week.
I remember the moment I realised how foolish this was. My then boyfriend, now husband, and I had braved drizzly weather and gone to Columbia Road Flower Market for a Sunday afternoon out*. I had chosen an array of blooms and foliage; some scented, some merely elegantly shaped. I was clutching them against my chest, almost up to my face, as a I walked to the train home. My mind was on which vase would suit them best for arranging.
I love London, but grey streets under grey skies can bring you down. Having this armful of living colour with me brought me so much joy. As a noticed my joy, I had a flash of insight. The flowers had cost the same amount as the tea and cake for two we had bought in a chichi independent café at one end of the market. I hadn’t thought twice about the refreshments. I was revelling in my flowers.
That was a defining moment in how I think about my non-essential spending. It stopped just being about whether something was cheap or expensive within its category of expenses (food, event tickets, clothing and accessories etc). I started to compare across categories and to think about how much joy each purchase would bring me for the price. This changed my appreciation of value and means I spend more wisely and get more from my purchases of all kinds.
I’m still more likely to buy coffee than flowers, because catching up with a friend is joyful too. (More than ever after months of lockdown.) However, I no longer rule out a whole type of spending without considering it first, and I suggest you don’t either.
Did this blog post make you think? You will probably enjoy the episode of my podcast, Squanderlust, where we talked about ‘mental accounting’ and the weird tricks our minds play on us about prices. Listen here.
*For those not in the know, Columbia Road stall-holders discount their plants and flowers after about 1pm, so they can pack up and leave with minimal waste.
Reluctant meal planning for low effort frugality
Is meal-planning worth it?
When I realised that meal-planning saved us nearly 40% on our grocery bill, I was shocked. I thought I was already being pretty thrifty. After all, I compare prices carefully looking at £/ml or £/kg rather than assuming that similar sized packages were directly comparable. I mostly resist the discounted items, unless I know we’ll eat them. I default to generics and own brands and only buy a name brand when I knew it really made a difference. I used to go through the supermarket counting in my head “Two people means 14 portions of food for dinners over the week. I’ve got enough chicken thighs for four portions plus a tin of chickpeas, that’s another two portions. That’s three main dishes. Plus vegetable for five portions and we had some leftover salad we can have tonight that’s seven plus…”
What I’m trying to say is, I wasn’t throwing money around. Meal-planning took my thrift to a new level.
I’m not sure why I resisted the idea of meal-planning other than that cooking has always been a creative outlet for me and it felt limiting to plan overly. However, the longer my sweetie lived with me, the clearer it became that he wasn’t always keen on my more experimental dishes and the more I turned to recipes. No complaints, using more recipes has taught me to be a better cook. It also got me meal planning. After all you can’t follow a recipe if you don’t have all the ingredients. How do you have all the ingredients? You decide what you’re going to make before you shop.
So, I began meal-planning and a couple of things quickly became clear:
When we only bought exactly what we needed for the meals we had planned (plus sundries for breakfast, lunch and snacks) we saved a fortune on food that I didn’t even know we’d been wasting.
Meal-planning was boring and took much longer than it seemed like it should. I needed a system to deal with that or I was going to run out of steam very, very quickly.
What are my meal-planning strategies for long term success?
Plan multiple weeks
The first thing to do is to realise that meal-planning one week at a time is asking for trouble. It means you have to find the energy and creativity to make a new plan every single week and who has the time and energy for that? There are so many better things to do. Take a nap, cut your toenails, literally, almost anything.
Instead block out a morning or an afternoon to work out plans for at least four weeks. Once you have four weeks you have enough to rotate between them without everyone getting completely sick of eating the same flipping thing all the time. You can add more weeks later and i advise you to do so.
Use technology
The whole process is a lot easier with technology on your side. I use an app called Recipe Keeper for meal-planning. It can import recipes from websites or scan them from cook-books and then you can tag and categorise them. You can then assign a recipe to a date and mealtime. The app will generate shopping lists, to which you can add toothpaste, bleach etc, and print if you prefer a paper list. There are loads of these kinds of apps. Feel free to experiment until you find one you like.
If you’re not using an app, make list of recipes in a spreadsheet and, for goodness sakes, include details of where to find the recipes in your list. If they’re online, include the links. If they’re in books, include book titles and page numbers. If you must use a paper list, well, you do you. You still need to write down where to find your recipes.
Categorise all the things
OK, so you’ve gathered the recipes you are happy to put in your initial four week rotation. (Remember you can add weeks later, my rotation is up to about nine weeks now.) Now categorise those dishes into groups that make sense to you. Some possible categories: chicken, fish, curries, stir fries, casseroles, slow cooked, pasta, vegetarian, under 20mins. The key to your categories is you want them to be fairly broad, because you are going to use one or two categories for each day of the week.
This is my next big tip for making meal planning easy. When your week has a pattern it makes it much easier to slot dishes into that pattern. It also means that when it comes time to cook you know what category of dish you’ll be making by what day it is.
Our week goes something like this:
Monday - Indian dal with flat breads. I have sooooo many dal recipes - thank you Internet!
Tuesday - East Asian chicken or tofu curry - usually using a ready made curry paste. Quick, simple, tasty.
Wednesday - Pork - usually chops or stir fry. Again something quick and simple.
Thursday - Another vegetarian dish - either the other half of the packet of tofu or something with chickpeas.
Friday - Wild card - maybe fish cakes or pasta or bangers and mash or burgers.
Saturday/Sunday - usually something that takes a bit more time to cook like a stew or braised dish, or else a roast dinner.
Work around the rest of your life
Your plan does not have to look like my plan, but I do want to point out the timing element. Dishes that take time to cook happen on the weekend. Week nights are for relatively fast meals. Pay attention to the schedule of your life when planning your meals. Also consider your energy levels through the week. I have the least interest in cooking on Tuesday nights, so protein plus veggies plus curry paste plus coconut milk is about my level. On weekends I enjoy taking the time to make something to make something a bit more involved. Do what works for you. If your kids do after school sports one day and always come home starving give them something big and solid that day. If there’s a day you are always rushed off your feet then do yourself a favour and put in something minimal effort.
Shop to the plan
This is where the magic happens. When you start shopping to a plan you find your trolley looks weirdly empty. It’s ok, you’ll get used to it. Because you are only buying the ingredients you need to make the things in this week’s you plan, you’re not ‘stocking up’ on random items as you go. It’s amazing how much less you buy when you do this.
Iterate
The chances are your first meal plan is not going to be perfect. That’s fine. Once you have the broad structure in place you can make tweaks as you go. Maybe swap one or two nights around. Maybe take out a recipe that isn’t as popular as you thought. Maybe double up a favourite across more than one week. You might like to keep in a ‘Wild Card’ night like I have, so you don’t get bored and you can try out new recipes.
You might get really into meal-planning and find yourself planning breakfasts and lunches too. All power to you I say!
Do you have any meal-planning tips I’ve missed? I’d love to hear them in the comments.
Money isn't food - do you treat your pay like it has an expiry date?
I have a long-held theory that, on some level, many of us secretly treat money like it’s food. We don’t do it on purpose, but our poor old monkey brains struggle with the concept that we keep a stock of otherwise useless tokens in order to trade them for the things we need later. Why would anyone give you a thing you want in exchange for a useless token? Make money even more abstract (just a number on a screen) and the monkey mind gets completely fuddled. Why are we keeping the numbers high? What use are they? They are only useful when they get us stuff. Stuff is real. Numbers on a screen are not real.
I think for some (read many) people our subconscious minds try to make sense of money by deciding it’s just another type of food that we ‘eat’ by spending it.
It’s well-documented that people whose eating is disordered also often have money issues. This is not only because some eating disorders are expensive, but because the same attitudes of perfectionism, self-denial and shame and around pleasure and self-care that drives much disordered eating, also affects our feelings about money.
So, if we unknowingly, secretly believe money is food and we get the value of it (eat it) by spending it, of course we don’t want to save it. If you save food for too long it goes off. I think some of us deep in some part of our brains believe money will too! This goes double if we’ve never saved successfully before. Until you have saved successfully you have no evidence that money can be stored and not decay.
Of course, the rising cost of living does, to some extent, reduce the value of money saved over time. To make sure money keeps pace with inflation and ideally outgrows it, that money must be put to work, i.e. invested. Here I think we can come to an analogy that might be ancient enough to allow our under-evolved brains to grasp it.
Money isn’t food, or at least it isn’t just food, money is seeds. If you can convince yourself that money is grain you can start to get a feel for what you need to do.
When you get your grain harvest (pay cheque) you don’t grind and eat too much of it, because you need what you can get for future crops. You plant it (invest) in the best locations you find, but maybe not all in the same field in case something goes wrong in that one field and you lose all your crop (diversify). You also hold a bit back in case the crop fails and you need to sow again or in case you miscalculated and your food stores run low (save).
Seeing yourself as a money farmer, instead of a consumer, makes it easier to remember what you have to do to shift away from living pay cheque to pay cheque, and start saving and investing for your future.
Now go out and tend your crops!
Does this post sound like you? Or someone you know? Share it and tag me in @marthalawton on Twitter or @squanderlustpod on Twitter, Facebook or Instagram.
The first time talked about this idea was on the Seize The Moment podcast and you can watch the whole show here or jump to 3:25 where I talk about treating money like food.
Need the willpower to stop overspending? Cut out scratchy clothes labels
Have you ever got up in the morning with the best frugal intentions, then by night time you find yourself looking at an order confirmation email wondering how you ended up browsing for window boxes or signature scents in the first place?
You have just been caught out by ego depletion and you are not alone. Ego depletion is the term for the way your willpower gets drained through the day by the effort it takes to meet the challenges we face. Every time we face a challenge or temptation we have to decide whether to take the option with the best long term outcome or the one with immediate rewards and these are often not the same option. research ahs indicated that willpower is like a muscle and as you use it through the day, it gets tired.
Basically, you can only be patient, tolerant and self-denying for so long before you run out of willpower and do something that feels good in the moment and damn the consequences. That might be snapping at a co-worker, eating a grab bag of Hula Hoops or treating yourself to some fancy new underpants from that store that always emails you.
Let’s face it life sucks sometimes and growing more willpower just because we want to isn’t really an option, so how can we make the best use of the willpower we have?
Get rid of minor irritants
Wherever possible:
Cut out scratchy labels and donate or sell stiff, itchy or tight clothing and shoes that pinch;
Learn about your devices’ settings so you can customise them for your personal preferences;
If there are tools or pieces of equipment you use often, make sure it’s the best quality you can afford, so you’re not frustrated by bad design or shoddy construction;
Ask colleagues, family members, friends and neighbours to change habits they may have that annoy you, it’s possible to have these conversations tactfully and still ask clearly for what you want;
Consider noise-cancelling headphones for times when you need to focus;
Keep your environment at a comfortable temperature, clean, pleasant smelling and uncluttered.
Generally pay attention to low-level irritants that drain your willpower without you even really noticing. The more of these you’re putting up with, the less willpower you have for making positive choices when faced with temptations.
Look after your health
Physical and mental discomfort from poor health is something that drains willpower
Do what you can to get enough sleep;
Eat well so you’re not hungry, sugar-crashing or suffering from indigestion.;
Move your body and stretch often, so you don’t end up stiff and cramped;
Ensure your work environment is as well-designed and ergonomic as possible, so you’re not straining to complete tasks;
Don’t overdo the screen time and stay away from social media drama;
Find ways to relax, ideally somewhere quiet in nature, and take a few deep breaths.
Treat yourself (in moderation)
Pre-emptively doing small, nice things for yourself will help you to replenish your willpower and avoid the need to vent, binge or splurge. This is why no spending plan should completely exclude treats. You know what treats look like for you, make sure you have a supply to keep you going, so you don’t feel deprived.
Celebrate your wins (including times when you successfully exercise willpower). Giving yourself a pat on the back is an immediate reward and takes the edge off the pain of delaying gratification.
Finally, forgive yourself. If you are fighting the willpower war on too many fronts and lose a particular battle, don’t get too down. Instead think whether you’d be better served easing up on one or two areas and focusing your efforts elsewhere. Nobody’s perfect and a constant feeling of failure is a drag on willpower too. If your focus is your finances, just keep everything else ticking over for now. Once you’ have your money in better shape, you can choose a new goal elsewhere.
If you want to hear more about ego depletion and the science behind it, listen to this episode of my podcast Squanderlust: Episode 3. Willpower Outage.
How to be more optimistic about money
It’s Mental Health Awareness Month and one feature of poor mental health is a skewed sense of optimism, so this post is about that.
Optimism is a funny thing.
Too much and you don’t prepare for the worst. I’ve been vocal about how often people don’t buy insurance or save for emergencies because they assume bad things happen to other people.
On the other hand, if you’re too pessimistic, you won’t take the action you need to improve your situation, because, well… what’s the point?
So we want to build a Goldilocks mindset around money and get amount of optimism just right.
Thankfully, there’s some great evidence about what can help us to think more positively without losing sight of reality. Positive Psychology is the study of happy, mentally healthy people with the aim of learning how everyone else can be more like them.
The founder of positive psychology, Martin Seligman, identified three key attitudes towards life’s challenges that lead to either a more optimistic or a more pessimistic viewpoint, with the optimistic view generally leading to better outcomes overall. These are called the “three Ps” of pessimism.
People who are pessimistic tend to see setbacks through the lens of Personalisation, Permanence and Pervasiveness. What do these mean and how do they play out in terms of our finances?
Personalisation
“It’s all my fault!”
Personalisation means assuming that bad events happen to you because of something about yourself. It means assuming all the blame, whether that’s realistic or not.
Financial examples:
At the less harmful end of the scale, this might look like a homeowner who engages a builder and finds the final bill is higher than expected. The builder may have been unclear about their costings or have inflated a price somewhere, but if the homeowner tends to personalise they will feel angry at themselves for not having checked the costs more thoroughly sooner.
At its most harmful, this could look like a person who feels cursed with bad luck on some level so that they blame themselves when things happen that are completely outside of their control. For example, their chosen retirement date may happen to coincide with a small fall in the stock market (leaving them with a smaller pension pot than they had expected) and they feel in some secret part of their heart that the stock market fall happened because they were due to retire that day.
The optimistic view
A person with an optimistic viewpoint understands that the must take responsibility for their actions, but only in proportion to their potential effects. They do not automatically assume that they are at fault if things go wrong and they certainly don’t blame themselves when the outcome is largely or entirely due to chance.
Advice
If you tend to assume that setbacks are always your fault, try to challenge this by thinking about who else influenced events and what role chance played in the outcome.
Permanence
“It’s never going to get any better.”
Permanence assumes that any change for the worse is going to last forever. It says that once something goes wrong, this is just how things are now.
Financial examples:
A person asks for a pay rise and is refused. They assume that their employer will never agree to pay them more or promote them in future. They become discouraged and underperform or look for a new job.
Another example, a person accidentally misses a bill payment and it shows up on their credit record causing their credit score to fall. They assume that this means they could never get a good deal on a personal loan, let alone a mortgage.
The optimistic view
Things change all the time and there are often solutions to issues, even if you don’t know what they are when the problem first arises. Just because things are difficult now doesn’t mean they can’t improve.
Advice
Think of a time when you faced difficulties in the past that no longer affect you. Things may have seemed bad then but now you' barely remember it happened. Whether through resourcefulness, hard work, luck, or just letting time pass so that an issue became less relevant, you have overcome and moved on. Times always change, and nothing is permanent, including your troubles.
Pervasiveness
“One thing went wrong - everything is terrible!”
In this mindset, a small difficulty or embarrassment is a sign of a much larger problem. Specific issues that could be fixed with specific actions are generalised into fundamental flaws or failings to big and all-consuming to solve.
Financial examples:
A person whose card is declined declares themselves “hopeless with money”, even though with a bit of practice at planning and avoiding overspending they could avoid this happening in future.
A person makes a failed insurance claim and says “all insurance is a scam”, even though the problem is just with this single claim and they have many steps they could take next including: checking their policy terms to make sure they claimed under the correct part of the cover; submitting more evidence to the insurer; or making a complaint.
The optimistic view
The optimistic person gives life a second chance and waits for a clear pattern to emerge before generalising. The take each issue as it comes and try to find solutions to each one.
Advice
Listen to how you speak and identify when you’re using words like “everything”, “nothing”, “always” and “never”. These are often a sign of Pervasiveness in your thinking. Other signs are using generalising/labelling phrases like “I’m so…” or “Banks are…”.
When you catch yourself using this language try to replace it with the specifics of this incident. That will give you a more realistic viewpoint and potentially help you identify solutions to the issue at hand.
Learning to drop the three Ps will help you keep negatives in perspective so you will feel more in control of your money.
Did you find this useful? Comment below if there’s a mental habit you’re going to change.
To learn more about money mindsets listen to my podcast Squanderlust.
Has working from home fed your online shopping addiction?
We all know online shopping sites have been the winners of lockdown. Even as we begin to open up again, things are still in limbo and, I don’t know about you, but I have that final furlong feeling. Having the end in sight makes the remaining restrictions feel more onerous.
If you’re working from home where there’s no watercooler gossip, it’s tempting to spend break times browsing eBay, Amazon or your other favourite stores.
Feeling bored, stressed and lonely can lead to “comfort spending”. Treating yourself to a little something in the post can, weirdly, feel like someone cares, even if that someone is you.
If you’re relating to this, here’s my top tip for avoiding online shopping on your breaks: schedule something else to do.
I know it sounds obvious, but it’s actually really powerful. Working from home can be much less structured than working at your employer’s premises and a lot of people have complained about a disorientating sense of “pandemic time” passing differently from time in their previous life.
What can you schedule?
A catch up call with someone you actually like
A walk around the block
A YouTube dance party
A short meditation
A short creative or craft activity
Water your houseplants
Play or snuggle with a pet
Read a something fun that’s not thing to do with work - novel or magazine (not online, ideally hardcopy but e-reader will do)
Solve a puzzle
Warning: you might need to set a timer to make sure you don’t overrun (because pandemic time).
The important thing is that whatever you do you’re not on the internet and the activity is relaxing and will refresh you. Note I haven’t included chores in the list, although I suppose if you find housework relaxing you could do fold laundry or pre-prep dinner from time to time. You want to make sure in general though your planned activities are fun rather than practical.
Actively choosing when you’ll take a break and scheduling an activity you’ll look forward to will bring structure to your day and improve your overall well-being as well as reducing the risk of impulse shopping.
And if you really miss getting nice post, you can always send postcards to a few friends and see who sends one back. It’s better than sending things to yourself.
A few weeks ago I was on Podcast from the Past (the postcard podcast) you can listen here.
Understanding the poppadom effect
Who loves poppadoms? I know I do. Crunchy savoury appetisers are my favourites.
You know who else loves poppadums? (Or olives or prawn crackers or bread baskets or whatever…)
Restaurants. You know why?
Because they cost almost nothing compared to the sale price and almost everyone orders them, even customers who intended not to.
In fact, we quite often order little extras we hadn’t meant to buy. Going to the till with a new sweater we see some earrings that would go with it and think we might as well have them. We get a screen protector to go with our new phone. We buy the upgrade, the insurance, the add-on.
Why?
The poppadum effect.
Once you’re already paying for a whole meal, the cost of poppadoms seems trivial in comparison, so why not? The poppadum effect is a type of mental accounting; a way our brains trick us into making unwise decisions by using a cognitive shortcut that doesn’t take us where we really need it to go.
Once you’re committed to purchasing a new tablet (say), adding the cost of a case seems negligible. Shops know this and they play on it. Salespeople are trained to offer the extras after you’ve decided to buy and there are always tempting small items at the till.
The truth is these little extras are often the poorest value for money in the store and if we were thinking clearly, we wouldn’t have bought them at all, but in the moment of purchase we’ve already overcome the resistance to spending and the part of us that always wants more can take its chance and add to basket.
Being aware that this is a common phenomenon can help you make better decisions. I, for example, will always want poppadums, but only one, thank you.
Take a minute when a shop offers you an extra or an add-on and remember you almost certainly don’t need to make a decision about it straight away. Say you’ll think it over, because nine times out of ten you can come back for it. You might even get a discount.
I did a podcast episode on our weird irrational responses to prices. You can listen here.
Nine areas I look at when assessing financial products
Understanding financial products can seem overwhelming. There’s so much jargon and the numbers can make your head spin if you don’t know what they mean. Contract documents are lengthy. Even “key features” can run to several pages. There might be an adviser to hand you can ask for help, but what do you ask about?
The more you build your knowledge about products, the more you start to have a mental checklist of features you watch out for in the documents.
Here are a few key areas I suggest you make a habit of finding and understanding. Not every question applies to every product, but they are as broad as possible.
What do you know about the provider? Are they properly regulated? What’s their customer service like? If you have a complaint and they don’t resolve it properly for you, who can you take that up with? What compensation covers you if something goes wrong?
Interest rates (you want these high for saving and low for borrowing) - are they ‘fixed’ so they’ll stay the same for a set period of time, or ‘variable’ so they could change? What would you prefer in this situation?
Fees and charges - are they a flat cost or a percentage? Are they standard for everyone or are they affected by your actions? How low can you go?
Dates/time periods - do these match up with your current lifestyle and future goals?
How much do you pay? How do you pay? How often do you pay?
How do you get money back? Do you have to give notice to get it? How much? Do you have to claim it? How? Is there any reason you won’t get anything back?
How is the product affected by the rising cost of living (inflation)? Some products have ‘index-linked’ features which means they track the cost of living (for example a life insurance policy with a slightly bigger potential pay out each year to keep pace with rising prices). Index-linking often means you may pay a bit more but, for products you will keep for a long time, it can be worth it.
Is there investment risk involved? How much? Do you understand it fully? Are you comfortable with it, given any other risk you may be taking?
Are there any conditions you must keep or else you’ll have to pay a charge, or lose all or some of your money? Is there anything you could do that would completely invalidate the product and make it worthless?
These are only the starting points, but they will give you a good steer.
The essential questions are:
who pays how much to whom?
when and under what circumstances do they pay it?
and is there anything that might prevent them?
what would happen then?
I’d love to hear what you look for when choosing financial products.
Did you find this useful? Check out my book on personal finance for freelancers.
The mindset shift you need to feel confident negotiating
Who here loves negotiating?
Yeah, ok, that one weirdo standing up and waving enthusiastically, we can see you. We can also see all the people who almost crawled under their chairs at the thought.
Do you think negotiating is all about bullying someone into submission?
Do you think it’s about who can play the dirtiest tricks?
Does the word negotiation conjure up images of high drama; staring contests, fists slamming into tables, threats to flounce from the room and so on?
Do you secretly believe you have to be an ‘alpha’ (lol) to get your way in negotiations?
Negotiating is one of those things that many people mentally put somewhere between “I’d rather not” and “can’t I just have a root canal instead?”. Actually a small shift in mindset and it needn’t be painful at all.
The truth is everyone negotiates. If you have worked out who’s going to do the vacuuming and who will take the rubbish out with your partner or housemates, you have negotiated. If you have told a child they can have a treat as long as they’re quiet until the grown ups finish talking, you have negotiated. If you’ve coordinated with a group of friends about when and where you’re going to meet up and hang out (those were the days!), you’ve negotiated. Everyone negotiates it’s just a questions of how, with whom and over what.
Funnily enough, we’re often happy to negotiate in settings where money doesn’t come into play. but when one of the factors we’re discussing is money, suddenly we realise we’re negotiating and it all feels much more scary somehow. It doesn’t have to be that way.
Negotiating doesn’t have to be a competition, it doesn’t have to be a zero sum game. Often a really good negotiation is less of a fight and more of a collaborative problem solving process. Ideally you’re trying to get to a win-win outcome.
If you struggle to negotiate because the idea frightens you, make a list of the times you had a friendly discussion with someone about what they need and want, versus what you need and want and tried to find a solution that works for everyone. How did it go? What helped you find a good solution? Were there ways you were able to be creative so everyone ended up happy?
This is your successful negotiations list. Take this same mindset you had in these situations into negotiations that involve money. You’ll feel more confident and get better outcomes.
To learn more about negotiating, I recommend Getting to Yes * by Fisher, Ury and Patton, it’s a great book that massively boosted my confidence in negotiating in business settings and elsewhere.
If you’re specifically negotiating a price for your time (as an employee or self-employed) you can listen to this episode of my podcast, Squanderlust, where we talked with start-up mentor, Jasper Lyons about exactly that.
What are your best negotiating tips?
(*Yes, this is an affiliate link. Buying from Bookshop.org helps support independent bookshops and I get a small % of the purchase price.)
My top three financial tasks to schedule today
Do you put off doing your finances because, frankly, there's always something more fun to do?
Do you end up saying “I’ll do it later” and going back to scrolling Instagram instead?
Does all of this leave you with a vague feeling of self-disgust and impending financial doom?
Do you ask yourself why you can’t just force yourself to get it done?
Once you get going with money management, watching your numbers get better can be rewarding. Seeing the debt drop and the savings rise feels really good. There are even ways to make a game out of some kinds of money-saving. In general, though, managing money is admin. There's no getting around it so you might as well own it.
In fact, I think the expectation that doing your finances should somehow be super easy or enjoyable can be counterproductive. Expecting it to be kind of a drag, and then just buckling up and getting on with it is honestly more effective.
The trouble with financial admin is that it's easy to procrastinate over it. Insurances auto-renew, deals on credit, savings and utilities expire - but you still get the service, and there's always something more exciting to do than track your spending against your plan.
Letting things just happen to you is easy, but it’s disempowering and it costs you money. Your spending creeps up and you don’t notice. You don’t spot frauds or mistaken charges against your account. You miss out on deals and end up overpaying.
Scheduling time to catch up on financial tasks can help make sure you don't give in to that urge to sack it off and watch telly.
Here are my top three types of tasks to schedule:
A regular time to analyse your spending for potential cost savings - about 15-20 min a week;
A regular time to check for unexpected payments from your bank account - about 5-10min a week;
Six weeks before any contract or deal ends time to research and find a new one - about one hour each time.
Knowing you have an appointment with your money means you can switch off and not worry about it the rest of the time.
I'm all about helping my clients make life easier for themselves. Letting your calendar help you manage your money is a really good start.
For more on how avoid procrastinating on financial tasks, or anything else really, check out this episode of my podcast, Squanderlust.
We all make money mistakes (even Martin Lewis)
A few years ago I was at a financial education conference where the big finale was a Q&A with Money Saving Expert, Martin Lewis. (It was pretty exciting. Yes, I am that much of a nerd.) He was a great speaker, as expected, but only one thing has from that session really stuck with me. That's the question he didn't answer.
A member of the audience asked if he'd ever made any money mistakes and, if so, what were they? Martin laughed and there was a flash of pain and embarrassment across his face, as if he'd been reminded about a proper blunder. Then he said he had made mistakes, but he didn't want to give details. Now, that's totally within his rights. Maybe his biggest mistakes involved other people's private business, or maybe he just didn't want some silly tabloid article coming out the next day, taking what he said out of context. But it also says something about how we talk about money in this country.
There are the experts who are often portrayed as if their financial decisions are flawless, and then there are the rest of us with our forms we haven't posted yet and our unopened bank statements and that insurance that auto-renewed, even though we know if we shop around we'll get a better deal. I hear so many people say they are 'bad with money'. I also see a lot of people become overwhelmed by the idea of sorting out their finances. I think it's because they compare themselves with the 'perfect' experts, who seem to have it all sorted out.
If you relate to that feeling, I want you to take heart, even Martin Lewis has made money mistakes. (Though he's keeping them to himself.) Instead of trying to reach financial perfection, just aim for a bit better than yesterday. See if you can get good enough with money. Good enough is just that, good enough. Better than yesterday is still better. Take action to improve and then celebrate your progress, instead of getting down because you're not perfect. We're all still learning every day.
When I started my podcast, Squanderlust, being open about my own money fails was an important part of the philosophy of the show. You can hear my former co-host, Alex, and I talking about it in our very first episode.
Hey freelancers! Your pricing is not about you
Wait what? How is my pricing not about me? I am the one who made the sale. I am the one doing the work. I am the one who needs the money. How is not about me? Read on.
I was reading a Facebook discussion about figuring out pricing as a new freelancer. There were some great resources mentioned, like this Google Sheet for creative freelancers, so they can compare their rates with people with similar experience and skills (including adding their own, so others can benchmark against them).
There were also comments about how pricing links to confidence level and how struggles with confidence can affect your rates. This is absolutely true, the questions that freelancers ask themselves can be painful and undermine their ability to charge appropriately.
Am I qualified enough to charge this much?
Do I have enough experience to charge this much?
Will they think I’m greedy charging this much?
Am I greedy charging this much?
If I charge this much, will my clients think I only care about the money and not about the work?
Do I work hard enough to charge this much?
How many hours do I have to work to charge for a day?
Do I really deserve to charge this much?
Do I really need to charge this much, if I can cover my costs and live on less?
This kind of worry often comes from a place of seeing your prices relating to your effort and your needs. These questions are all about you.
These are the wrong questions. Some better questions are:
What problem(s) will I solve for my clients?
How easy is it for my clients to communicate with me?
How careful am I to ensure I know how to give clients what they really need by listening carefully and asking clarifying questions?
How much money/time/inconvenience/stress will I save my clients?
How much growth will my clients get (income/new customers/brand awareness/whatever) because of my work for them?
Do I demonstrated to my clients that I’ve done this? How?
The good questions are all about your clients, their needs and how well you meet those needs. The more you can answer these questions, the easier it will be to answer the most important question:
How much value am I providing my clients?
Because this is key: you should be paid based on the value of your work to your clients. It’s not about how you feel about your work, how long it took you, how much effort you put in, your past experience or qualifications. It’s about whether you meet your clients needs and what that is worth to them.
Provide a high value service? Charge accordingly.
Answer the good questions and you’ll automatically develop the confidence you need to set the right price.
If you found this useful, you might enjoy this episode of my podcast, Squanderlust, where we talked about valuing your time with start-up mentor Jasper Lyons.
You can also pre-order my book on freelance finances for a special launch price of £8.99.
What can a debt adviser do to help?
It’s Debt Awareness Week in the UK, a week aimed at de-stigmatising debt issues and helping people in problem debt get the help they need from an adviser.
One of the reasons we need this week is that people feel terrible about being in debt, but often don’t seek help before things reach a crisis point. This can be because of shame and fear of judgment, but it can also be because they don’t know how an adviser could actually help.
There’s a perception that budgeting is the only permanent way out of debt, as if once you’re in debt your only options are:
a) misery-misery-misery-bankruptcy
b) live on bread and water (also miserable) until everything’s paid off
I’m leaving out consolidation loans here because those aren’t a solution to debts, just a way to change the type of debt. All too often people who consolidate their debts into a loan keep over-spending and end up in worse trouble than they were before.
Before we go any further understand I’m talking about the advisers giving free advice at debt advice charities. I am not talking about fee-charging advisers. While some fee-charging advisers do give good advice, sadly many give biased advice aimed at pushing you to an unsuitable (but profitable) outcome. To find a reliable, free adviser go to one of the organisations listed here.
The thing is that debt advisers are actually legal experts specialising in the debt law. They know about the legal and regulatory frameworks surrounding lending money, enforcing payment of debts and the protections that people in debt have against being driven into unreasonable hardship. They also know the codes of practice lenders claim they stick to and can spot when they’re not doing that and hold them to accountable. That means that they can find solutions that you or I wouldn’t necessarily know about.
Let’s look at a few of those solutions.
Showing you don’t actually owe the money
Sometimes people are worried about a debt that they are not in fact legally responsible for paying. Some examples might be:
spouse’s debts - unless you signed the contract too, your husband or wife’s debts are often their problem. (There are a few exceptions like utilities, Council Tax and TV Licence for a shared home.)
inherited debts - when a person dies their debts must be paid out of the money and assets they leave behind (their estate), but if they don’t leave enough behind to pay off the debts, then the remainder of the debt dies with with person.
debts where the paperwork is incorrect - did you know that if a lender gets their paperwork wrong they forfeit the right to collect the money they lent you? Now you do!
All of these issues are more complex than the few sentences I’ve given you here, but they illustrate the general point. Sometimes you might not need to pay what you think you need to pay and a debt adviser can get the creditors to back off.
2. Getting interest and charges frozen, so it’s easier to repay
Actually you may be able to do this yourself. Instructions for how to go about it are in National Debtline’s How to Deal with Debt Guide. This is an early step in everyone’s debt advice journey. When you’re being drowned in late fees and interest on your interest, stopping that flow is vital.
Typically fees and charges would be paused for three to six months with a review at the end. The aim is to give you time to find a more permanent solution
3. Maximising your income
Many debt advisers are also familiar with the benefits system and know of grant-making charities that can get you money to help with some of your debts. For example there are specialist charities that can help with gas, electricity and water arrears. Helping you find income you didn’t know you could get is a part of a debt advisers job. They are also good at spotting insurances you may be ale to claim against. Or charges you should never have paid that could be reclaimed.
They may also be able to help you cut your costs in ways that would help you get your books better balanced.
4. Negotiating lower repayments
A debt adviser will be able to help you prioritise which debts need to be paid off first, based on the consequences of not paying. Then they can help you develop a repayment plan that is actually affordable while still leaving you money for a frugal but realistic lifestyle. This may mean that some lenders who have been bugging you for more money may actually be low priority and will have to suck it up and accept that you’re only going to give them a token payment of, say, £1 a month for the foreseeable future.
NB this can affect your credit rating, but you shouldn’t let that stop you. It’s usually better to take the hit in the short term and then rebuild, than carry on and miss payments leading to more stress and a worse mess.
5. Writing off all or part of your debt
Sometimes a debt adviser will be able to convince a lender that you will never be able to repay them in full. The creditor might then agree to write off all or part of the debt. If you have a pot of money (eg an insurance pay-out, some savings, the proceeds of selling something valuable etc) your adviser can negotiate with the creditors to share this out fairly between them and ask them to write off whatever’s left over. Since something is better than nothing many lenders will go for this.
Alternatively, the adviser could plead your case that you’ll never be able to pay and it’s costing the creditors more in staff wages trying to chase you than they’ll ever make back. This may convince the creditors to cancel the remaining debt.
Again these solutions will affect your credit record, but, in my opinion, they’re well worth it for the peace of mind. Also lenders are unlikely to accept either of these options unless you’re really struggling and things aren’t likely to get better, for example, if you’ve had to give up work due to an injury or sickness. If that’s your position, I’d suggest prioritising your wellbeing over your credit rating.
6. Suggesting the right formal solution
Sometimes insolvency is the right answer. That might be bankruptcy, an individual voluntary agreement (IVA), or a debt relief order (DRO). I’m not going to go into the difference between these solutions here but suffice to say if a debt adviser suggests one you should consider it carefully. People get scared of formal debt solutions but they’re a protection, not a punishment. It’s unreasonable for you to spend decades paying down debts. If the alternative is a DRO, bankruptcy or an IVA you should consider it.
Each solution has its pros and cons and terms and conditions attached. Read these carefully and make sure you understand what you’re doing and that it really does meet your needs before you sign up.
I hope this helps you understand what a debt adviser could do to help and why it can really help to speak to them as quickly if you’re struggling with debts.
If this post has helped you, have a listen to these two episodes of my podcast, Squanderlust:
Episode 11: Interview Money A + E - I spoke to two former debt advisers about how their own experiences of financial troubles inspired them to help others.
Episode 23: Debt Advice Avoidance - Why do people delay getting advice? We talk about the psychology and give an overview of what happens when you meet with a debt adviser.
If you’re not yet missing payments and you’re pretty sure your debts come from overspending, in other words you think you could pay them back with some lifestyle changes, here’s some inspiration from people who have done just that.
When is a budgeting issue not a budgeting issue? (A blog post for freelancers)
When you’re a freelancer working out what you can afford to spend can be a nightmare. I mean, it’s ok if you’re established and making the big bucks, but what about when you’re just getting going, or if you’re in a field that’s more known for passion than paycheques?
How do you plan your spending when you don’t know how much money you’re going to have until you’ve got it? When you’re living job to job and struggling in between, it can feel like everything is out of your control.
I have lived this life. I know this issue well. I hate to tell you this, but this probably isn’t a budgeting issue, this is a business issue.
My first question for people in this situation is this: are you sure you don’t know what you’re going to make and when? Why not?
Many, many types of freelance work have a pattern to them; some are seasonal and follow the weather, or the academic year, or certain holidays. Others just tend to go through a cycle (pitch, contract, set up, work, close, payment) with relatively predictable timescales for each stage.
If you haven’t figured out the time patterns for your freelance work, it’s worth taking a few hours and trying to do so. These patterns determine when you get paid and that is vital information.
If you’re not a business-y type you probably avoid words like ‘cashflow’ but you’ll be familiar with the dreaded phrase ‘feast and famine’ or as I like to call it, having a lumpy income.
But unless you smooth out those lumps you’re always going to struggle, so go back through your invoicing, go back through your work calendar and look for the patterns.
Once you know roughly what happens with your work you can plan how you’re going to manage both your time and your money better. For example, your pattern might include something like this: “everyone needs my outputs about six weeks before the major holidays and seasonal events. I tend to get paid about two weeks after that”. So you can plot when those holidays and events come and reckon on getting paid about a month before each. Or else find another income stream with the opposite seasonal pattern to balance you out.
Or your pattern could be “it takes an average of six weeks from pitching to starting work, eight to finish a project, and another four from finishing work to getting paid” You know that you need to start pitching at least four weeks before work on each job ends, so you aren’t leaving a huge gap between projects and struggling for money if an invoice becomes overdue. You could also consider setting up your contracts for part payment midway through to prevent the gaps from getting too long.
Once you start paying attention to this, you’ll feel much more in control of what’s happening in your work. You can start looking for solutions and that will give you confidence as you promote your work.
It will also allow you to plan your spending, so you know how long you’re likely to have to make each payment last and you can make sure bigger essential outgoings tally in with times when you are confident of having more money.
Your daughter's spending plan
This is the final post in my series on different ways to budget a steady income. You can hear more discussion of the different methods here on my podcast, Squanderlust.
This method is actually a digitised version of the old school ‘envelope’ or ‘jam jar’ method. Hence the name. To do this, you’ll need an account with one of the new app-based ‘challenger’ banks - Starling or Monzo. It uses their spaces (Starling) or pots (Monzo) features to manage your spending. These features are usually marketed as a way to save for goals and they can certainly be great for that, they can also be used for controlling normal monthly spending.
How to
You will need to decide what your spending types are. I suggest keeping things simple and having no more than ten. These should be a combination of your day to day spending (e.g. groceries, clothing, transport) and occasional spending (e.g. repairs, device upgrades, gifts). Both Monzo and Starling have built in categories for types of spending, which they use to label your payments out so you can see where your money is going. You can choose to base your types on their categories or create new ones if theirs don’t quite fit.
You’ll need to work out how much money you need to cover each type of expense and I talked about this in a previous post in this series. This is your spending plan. The difference in this method is how you keep track once you have the amounts worked out.
Now make a pot or space for each type of expense.
When your income comes in, sort it into the pots/spaces according to your spending plan. Monzo has a Salary Sorter function which can help with that. You’ll need to do it manually with Starling.
Monzo has a function which allows you to nominate a bill to come from a specific pot, so you can name one pot “bills” and have all your direct debits/standing orders come from this pot.
If you have a Starling account you’ll need to keep the money for bills outside of your spaces until all the bills are paid, so you will want to make sure your bills come out of your account ASAP after payday.
Alternatively you might prefer to combine this with the ‘multi-account method’ from my previous post and have a completely separate account for bills. If you want this separate bills account also to be with Starling they charge a fee of £2 a month. You may decide this is worth it to get the additional control of splitting your bills from your spending while also keeping all your accounts with one provider.
Now when you spend money, pull down the same amount of money from the relevant space or pot, so you know what you have left to spend on each area of your life.
If you need to meet an occasional expense, transfer the relevant amount from the relevant pot to the main account.
If you are extra frugal one month and have money left in your spending money type spaces/pots on pay day, transfer the extra to an occasional expense pot/space or, if these are already looking healthy, into an actual savings or investment account where you can get a good return.
Let’s talk about the advantages and disadvantages of this method.
Pros and cons
The pros:
This is a relatively low maintenance way to control spending and make sure you have enough money to cover bills and save for short term goals.
It’s more mindful than the multi-account method. If you’re spending more than you intended, you can tell fairly easily where the over-spend is coming from.
Although it’s an all digital method, this has the advantages of a cash budget method. The amounts left available for each type of expense are very clearly visible whenever you go into the app.
As with the multi-account method, as long as you err on the side of caution each time, you can be a bit rough and ready in your calculations and still be ok. For example, if you know your phone bill is typically £17-20 then as long as you leave £21 in your bills account/pot for it, you know you will be ok.
You are almost certainly never going to get a charge for a bounced direct debit or an unpaid bill.
While you’re out and about, you can tell straight away if you can afford to treat yourself now or if you’ll need to wait. No need to consult your spreadsheet.
Very easy to sustain. If book-keeping style budgets don’t work for you and become overwhelming, this will almost certainly be a better choice.
Don’t have to remember to request/keep your receipts.
The cons:
May need to switch banking providers, which can have an impact on your credit record.
Takes time to set up.
Need to be comfortable with app-based banking.
Need to spend time moving money between the pots.
Need to be sure any automations are working correctly, have the right amounts and come out on the right days.
Unless you create a single “occasional spends” pot/space, you may find you need to pay for a particular item before you have saved enough e.g. if the washing machine breaks suddenly. This might mean you have to transfer between the pots/spaces for this type of spending to make up the difference.
What do you think? Would this style of spending plan work for you?
To hear more about different ways to plan and track spending, check out my podcast Squanderlust Episode 7 : Budget Pick ‘n’ Mix
Women's money and the echoes of history
I realised I hadn’t done an International Women’s Day blog, so here’s a quick link to a relevant podcast episode from the archives.
Back in September 2019, I and my former podcast co-host, Alex, were guests on The Couragemakers Podcast. Couragemakers is a podcast for creative women, many of whom struggle with life at the nexus of the starving artist myth and all our cultural baggage about women and money.
We talked about how recently women were not allowed to hold financial products in their own names. How easily within living memory woman had to get their father or husband’s permission to open a bank account or (gasp!) get a credit card.
This still has an impact on how many women relate to money and how both women and men respond to women who have money and are clearly happy, confident and competent around money. There are some ugly stereotypes about women who are cheerfully good with money that really should have been left behind at the turn of the millenium. We’re gradually seeing a change but it’s worth remembering how recent this is because otherwise we lose the context for so many people’s views.
Personal finance is still annoyingly seen as a male domain and the preferred role for women is ‘damsel in distress’ asking a man for advice or indeed giving up her financial independence entirely, so he can ‘look after’ her. Sadly, as the saying goes, ‘help is the sunny side of control’.
We talked about the macho culture of financial services and how this plays out in creating complex systems with impenetrable language and then condescending to those who don’t understand those systems.
We also talked about how understanding and taking control of money brings you a firm foundation to build the life you want, especially for women. Having clear financial goals and being educated about money brings a confidence that goes beyond your conversations with the person in the bank or at the insurance company. Knowing what you have to spend money on means you know what’s left for pursuing your pleasures and life goals and that is very liberating.
I created a set of links for listeners of the show who wanted to learn more about money. It’s still up, but this is a better and more up to date list.
During the show I also wished that I had a good book recommendation for women who want to know more about personal finance, and nowadays I do. You can find books I like, including personal finance guides, here (I make a few pennies of affiliate income if you buy something).
We also referred to this episode of Squanderlust about using money in line with your values, this one on financial self-care , this one about the Change Cycle and this one about creativity, drama and money.
The multi-account method
Today we’re going to get into budgets for people who really hate the admin side of budgeting. This is a way to automate parts of the control of your spending and make certain you have money ringfenced for bills and savings before you can spend anything.
How to
For this method you need three accounts, two basic or current accounts and one instant access savings account. The first current or basic account is for bills and other automated payments. this needs to have direct debit/standing order facilities. The other basic/current account is for spending money and it needs a debit card. The instant access savings account is for keeping money ready for occasional spending - things like birthdays, household or car repairs and religious festivals. It may be useful if this is with the same bank or building society as the spending account, so you can easily transfer between them.
You’ll need to work out how much money you need to cover all your expenses and I talked about this in a previous post in this series. The difference here is how you keep track once you have the amounts worked out.
Ideally, you should get income paid into your bills account. You will need to know how much needs to stay in this account to cover your bills until next payday. I suggest you keep back a little bit more than this amount, in case any of the bills is higher than expected.
Then decide what needs to be paid into your savings account to cover the occasional costs. If this will be a consistent amount, you can set up an automated payment to the savings account. Alternatively, you can make the transfer manually on the day you get paid.
Decide how much you want to go into longer terms savings and investments and, ideally, automate these transfers too, then you can treat them like a bill.
Finally, transfer the amount you want to use for day to day living expenses into your spending account.
If you need to meet an occasional expense, transfer the relevant amount from the instant access saver to the spending account.
You’ll need to keep an eye on how much is left in your spending account throughout the month. You should also schedule some time once a week/month to go though your bank statements/online banking. That way you can be sure that there are no unexpected payments and that the amounts you have going into each account are still appropriate.
If you are extra frugal one month and have money left in your spending account on pay day, transfer the extra to the occasional expense savings account.
Let’s talk about the advantages and disadvantages of this method.
Pros and cons
The pros:
This is a low maintenance way to control spending and make sure you have enough money to cover bills and save for short term goals.
Although it’s an all digital method, this has many of the advantages of a cash budget method.
As long as you err on the side of caution each time, you can be a bit rough and ready in your calculations and still be ok. For example, if you know your phone bill is typically £17-20 then as long as you leave £21 in your bills account for it, you know you will be ok.
You are almost certainly never going to get a charge for a bounced direct debit or an unpaid bill.
While you’re out and about, it’s very easy to see at a glance if you have spare fun money this month, or if you need to tighten your belt. No need to consult your spreadsheet.
Very easy to sustain. If you’re someone who has started multiple book-keeping style budgets in the past and never kept up with them after the first couple of weeks, this willll almost certainly suit you better.
Don’t have to remember to request/keep your receipts.
The cons:
Less likely to spot a fraudulent payment quickly.
Need to be sure your automations are working correctly and come out on the right days.
Less familiar with the nitty-gritty of your spending, so less likely to spot opportunities to save money, without additional effort.
Requires multiple accounts, probably with at least two different providers.
What do you think? Would this style of spending plan work for you?
To hear more about different ways to plan and track spending, check out my podcast Squanderlust Episode 7 : Budget Pick ‘n’ Mix
Book-keeping-style spending plans
Today I’m going to talk about the type of spending plan that most people mean when they talk about a “budget”. That is to say, a list of sources of income and a list of types of expenses and payments to savings/investments with weekly or monthly amounts of each beside them, so you can add up each list and check they balance. Actual income and spending is then tracked against the lists to make sure you’re not going outside your plan.
Let me give you an example. This is a plan for two parents on a moderate income with two kids and in a rented three-bedroom house with two cars to run and no pets.
Leaving aside the actual amounts here*, let’s talk about the advantages and disadvantages of this method.
Pros and cons
The pros:
You know exactly, and I mean exactly, what’s going on with your money at any given time.
You can catch any risk of overspending immediately before it happens.
You can spot fraudulent payments and rising costs immediately and do something about it.
The cons:
Time consuming - this is the biggest one, it takes time and effort to set up and then time to maintain.
If your spreadsheet or app goes wrong somehow, then things can get very frustrating.
You need to be consistent with it and build it into your routine.
May need to get into the habit of asking for/keeping receipts or you’ll have unaccounted spends which can quickly pile up.
If you think this method could be for you, here’s how you create a plan this way and make it work.
How to
You can do all the calculations on paper, but it’s easier with a spreadsheet and most spreadsheet programmes come with personal or family budget templates galore. There is also one on Money Saving Expert, StepChange and honestly, practically every money blog out there. You can also make your own. Alex did after we recorded this episode of Squanderlust and you can find out how she got on in this episode. I used to use this template, but I don’t use this method personally, any more.
If you’re going to build your own spreadsheet, you need to know what calculations need to go into it, so let’s talk about that. If you hate maths and will be using a template, you can skip this, but I promise it’s all very easy maths.
Weekly or monthly?
The first thing is that your spending plan needs to be for either weekly or a monthly spending. There isn’t a hybrid method. Weekly makes it easy to track smaller amounts of money and day-to-day spending. Monthly works better for bigger overall amounts, monthly salaries and bills paid by direct debit/standing order.
Our spending, however, usually comes in a mix of weekdays, daily, weekly, monthly and longer time periods. So we need to do some conversions.
To convert to weekly:
= weekday spend x 5
= daily spend x 7
= monthly spend ÷ 4.33 (because there are 52/12= 4.33 weeks in a month, not 4)
= quarterly spend ÷ 13
= annual spend ÷ 52
To convert to monthly:
= weekday spend x 21.66 (because 21.66 = 5 x 4.33)
= daily spend x 30.32 (because 30.32 = 7 x 4.33)
= weekly spend x 4.33
= quarterly spend ÷ 3
= annual spend ÷ 12
I don’t wanna do maths or spreadsheets
That’s fine, there are loads of online calculators that do this for you. Two examples that come to mind straight away are The Money Charity’s Budget Builder and the Money Advice Service Budget Planner. There are lots of great phone apps that do it too, but we’ll leave those for another day. You can also do a different style of spending plan altogether.
Make it accurate
I can’t emphasise this enough, your plan must be based in reality. If you fudge it you won’t be able to stick to it. How do you make it accurate? Look at the actual figures. Use bank statements, receipts, payslips, benefits entitlement letters, bills and so on to work out how much money actually comes into your household and where it goes.
This is often the point where people give up from sheer shock at the real numbers, which can seem very discouraging. They don’t have to be though. They’re your starting point, not your end point.
You can set targets to change the numbers as part of your plan. If you realise you’re spending more than you thought on energy, you can look at ways to cut your electricity bills. If you’re spending way over the odds on your phone tariff, that’s something you can switch up. If your grocery bill is twice what you thought it was, you can research tips on thrifty meals and avoiding food waste.
A note on occasional spends
One thing that wrongfoots people doing this style of spending plan is occasional spends. Birthdays, Christmas and other religious festivals, household repairs, replacement gadgets, school uniforms and trips, new tires and the like all need to be in your plan or you will never have the money for them and you’ll always feel like you “can’t budget because something always happens”. If they’re in the plan, you can put money aside for them each month. Build up a pot of cash in an instant access savings account ready to cover them. Work out what you expect to spend on each of these types of costs every year and treat like an annual cost as above.
Balance your budget
This is the moment of truth, when you add up all your expenses and take that away from the total of your income sources, what do you have left? If there’s money left over, happy days, you can put that towards saving and investing for your future. If not, then at least you can investigate where the issue is and look for fixes. If things are looking very bleak, don’t delay contact a debt adviser. If the idea of that feels uncomfortable, we talked about why it’s good to get advice early on the podcast, including a description of what happens when you go for debt advice, so you know what to expect.
Once you’re happy you’ve got your outgoings below your income and enough going towards your future needs and wants, take a moment to admire your plan. Congratulations on your hard work.
Wait there’s more!
Lots of people get this far and then stop, but I’m afraid this is the beginning not the end. A plan is pointless if you don’t act on it. Now you need to actually track your income and spending against your plan. It’s usually best to do this daily, or at least every other day. Miss this step and the whole ‘making a spreadsheet’ bit was a waste of time. You need to actually make sure you spending no more than you planned and that your allowances for your different categories were appropriate.
Once you start tracking, you might find that your plan was a bit out here and there. It’s pretty common to get it wrong the first time. That’s ok, you can adapt and update it as necessary. As you get better at finding ways to be thrifty, you can start putting more towards paying down borrowing or into savings and investments. Or, if you’ve been being a bit over-frugal, you can re-introduce some fun and creature comforts into your life, safe in the knowledge that you can afford them, because they’re in the plan.
(*this family could probably save loads on some areas and other areas the figures might be unrealistically low)
Would this type of spending plan work for you? What do you think?
To hear more about different ways to plan and track spending, check out my podcast Squanderlust Episode 7 : Budget Pick ‘n’ Mix
Mix it up with the cash combo spending plan
Last time I talked about the all-cash spending plan and the pluses and minuses with it. The most obvious minus is that paying bills in cash often incurs extra charges and is a giant faff.
Introducing the cash combo plan. All the convenience of electronic payments, just as tangible and intuitive as the all-cash plan.
Here’s how it works. You set up automated payments for all your bills, savings, insurances, and credit repayments. Make sure there’s enough in your current account to cover these each week/month, plus a little bit of extra, in case any of the bills is higher than expected. Then you withdraw the money for your spending including both essentials like groceries and more fun things like renting a movie.
You can treat the cash like you do for the all-cash plan, sorting it into envelopes for different types of expenses.
You’ll probably need more envelopes than this, especially if you have children.
Alternatively you can just have two envelopes, one for “essentials” and one for “non-essentials”. The key is to be over-generous with the “essential” envelope and not take money out of it, except for your those essential expenses, until you get to the end of the week/month. The one downside with doing things this way is you’ll know less about where your money is going than with the “types of expense” version.
Two nice, big, fat envelopes. More simplicity, less control.
At the end of the week/month if there’s still money in the “essential” envelope, you can decide whether to put it back into a savings/investment account or to treat yourself.
One thing to bear in mind is that because bills are easier to manage on a month by month basis but spending is easier to manage on a week by week basis, you may also choose to withdraw your spending cash weekly or to withdraw for the month, but have weekly envelopes.
You do know only February has four weeks, right?
So, what do you think? Would you find the cash combo spending plan useful?
For more on different ways to create a spending plan listen to my podcast, Squanderlust.
Going old school with your grandma's spending plan
Our first way to craft a spending plan (or budget, if you must) is the most low-tech way imaginable. This is a method that people used for centuries. Before there were debit cards and challenger banks and smartphone apps there was the all-cash spending plan. Your grandma or great grandma may well have used a system like this and with good reason. It’s simple and it works.
This way of planning spending has a few other names. People also call it the cash diet and, for reasons that will become apparent, the jam jar method or the envelope method.
Here’s how it works.
Take all your money for bills and spending for the week or month out of your account. Transfer the money you’re putting aside for future savings and investments into the relevant accounts.
Label a set of containers with the expenses you have to pay (fuel, water, food, clothes, children’s activities etc). Envelopes or jam jars are the classics, but a set of ziplock bags will work, or the zip-up pockets in a personal organiser.
Share your money out between the containers. Start with the most important bills i.e. housing costs, fuel, TV licence, council tax, and work down. Only spend from the correct containers, try not to swap money between them. Do not take money out of the containers for covering bills to pay for other costs. Have one container for emergencies and add to it each month. Wanting a bottle of wine is not an emergency.
Pros and Cons
This is a straightforward system and it can’t be fudged. The money is either in a container or it isn’t. This makes it a very tangible, intuitive system for people who struggle with focusing on the numbers on a screen or connecting them to their real life purchases. If your maths is a bit iffy, this requires much less calculation than other systems. You just share out the cash until everything is covered.
It’s also great if you have had a tendency to tell yourself it’s ok to overspend because you’ll “make it up later… somehow”. It makes it very clear there is no making it up “somehow”. The only way to make it up is to cut down spending on something else.
Of course, there are downsides. Most of us don’t want to pay all our bills in cash, even if we have the option. Automated billing saves a lot of time and effort and as long as the money’s there, you know your payment won’t be late and affect your credit score. Moreover, there are obvious security risks to keeping lots of cash in your home and most of us want to avoid those.
We’re moving to a cashless society and some shop assistants will look at you sideways if you pay cash, especially for bigger ticket items. They may think you’re involved in some kind of shady activity and trying to launder the money (although, for real, no one launders money that way, not efficient enough for the sums involved).
Depending on where you live there may not be a cash machine local to you, so making the weekly/monthly withdrawal may take planning. No one wants to spend extra on travel just to get their money if they can help it.
Still this is a solid way to plan weekly or monthly expenses for anyone who wants to get a really tight rein on their spending.
What do you think? Is this something you would ever try?
To hear more about different ways to plan and track spending, check out my podcast Squanderlust Episode 7 : Budget Pick ‘n’ Mix