Money problems/How to solve them

Miscellaneous and Personal Stuff I Must Share
1

Took a long time contemplating whether I should talk about this, but I have a problem with money management.

I seem to be falling behind on paying things and getting trapped in a debt cycle. I’ve reached a threshold of where my rent is being paid further and further into the following month. I can’t afford to save because my money goes on food and my small one bedroom apartment. I recently quit smoking, and that helped to show that if I didn’t quit, I would of been in a much more terrible financial situation than I am at the moment.

But I don’t understand guys, I’ve lived through my twenties pretty much in the ‘Upper-Poverty’ gap, and I don’t understand how some people can afford to run cars, save for first mortgages, go on regular holidays, and enjoy nights out without it hitting their pocket hard.

I make roughly £900 a month, £415 goes on rent, another £65 goes on a community charge, the rest I have to spend on food, I spend alot on taxis to work rather than walking, my girlfriend lives in Ireland (She currently works there) so I have to spend money on seeing her every couple of weeks.

Before I moved out last year from my dads (lived there for a year) I saved around £3000, that was the most money I have ever had in one time in my entire life, but now I’m back to square one, and I’m struggling, so I’m reaching out here for advice. I just seem to be incapable of saving money keeping my head above water.

2

First, you need to either become a roommate (there’s no room for someone else in your apartment, right?) or find a cheaper place to live. Then, you need to quit taking taxis. You’re going to have to take the bus or walk for most of your transportation. Third, you and your girlfriend will have to be content with seeing each other less often. Email is free.

You don’t mention it, but what are you eating? Are you doing most of your own cooking, or are you eating out, eating takeout, or eating mostly packaged meals? It’s very, very easy to let money pour through your hands if you’re in the habit of eating out, or getting snacks and drinks. Set a food allowance for yourself, for eating out. Get a separate little change purse, and put whatever money you want to spend for the week in it. When that money is gone, then it’s gone. No more meals out, no more snacks, no more drinks. This might mean that you have to take crackers and cheese to work on Friday for lunch. Don’t use your credit or debit card for this, just use that cash, because when you have to take the notes and coins out, and see how little is left, all of a sudden you will figure that you can do without the fancy coffee drink or the crisps. Do the same thing with your grocery money, if you can, just use cash.

How much do you drink? Alcohol is quite pricy, especially if you’re going out to drink. And beware of the mooch who never seems to stand his round. On the other hand, don’t be that mooch, either.

3

You create a budget. For example, in your case, we might say:
900 - take home

415 goes for rent

65 goes for the community charge whatever that is.

200 for groceries which is 50 bucks a week. Seems reasonable for one person.

40 for public transport (totally pulled from my butt)

20 for clothes

35 for miscellaneous expenses

90 or 10% of take home goes into savings
This leaves 35 for discretionary spending a month which is not a lot but you can adjust things up and down depending on how often you need clothing or the bus.

4

Try looking at your grocery habits. Buy in bulk, freeze what you don’t use in the short term. Also, bring a sack lunch to work.

More importantly, and I can’t stress this enough, start an Excel file and write down EVERYTHING you spend. Everything.

Once you get a birds eye view of where your money is going, you can make your own judgement as to which of those things are least important to you and get rid of them.
Also, start a savings account. The amount you put in their isn’t important. Even if it’s just $5 a week. (Sorry I’m an American.) What you want to accomplish here is a change in your habits. Don’t look at your savings account as ‘optional’. Look at it as mandatory.

Once you get your SA to a significant level, saving money becomes more fun than it is a chore, because you get to see your SA grow bigger and bigger by the day.

And quite frankly, it will make you slightly bummed on that rainy day when you actually do need to draw money from it. (It like loosing one of your children! :D)

5

I agree, the seeing the girlfriend needs to stop. Not that I don’t want you to see your girl, but she should understand you just don’t have the money to see her every couple of weeks. Are you in Europe somewhere, presumably?

Yes, walk more. In fact, save up your taxi money for a while and then buy a bike (and a helmet).

BUDGET. For a month or two write down every place the money goes and figure out where you expenditures are and where you can cut back.

6

Many places here won’t rent to you if the monthly rent is more than a third of your monthly income and you’re close to 50%. My suggestions is to move to Ireland and live with your girlfriend.

7

A good rule of thumb on how much money you should be paying out on rent or mortgage is 25% of your take home pay, give or take up to 30% but really no higher than that if you want to survive financially. If you’re only taking home £900 a month and spending £415 on rent, that’s 46%… WAY too much. Get a roommate find a way to bring home another £700-750 a month.

8

Thanks guys, no I don’t drink at home, and don’t go out much, I usually cook at home, I hadn’t bought clothes for a long long time, it got so bad that my girlfriend bought me some so I looked normal.

I started making my own lunches which was in part of my smoking habit taking up much of what I spent usually, but when I quit I kept that going.

Yeah I agree it’s habits, am still living in my overdraft which I seem unable to get out of, are they difficult to break out of?

9

Is your bank charging you a fee for the overdraft?

Are you living in one of these vicious cycles where on payday, you pay the OD and then by the time you get to payday again you go back into OD because you ran out of money like three days ago?

If so, talk to your bank. Sometimes they can take that debt to the side and let you pay it off in digestable amounts. This on the condition that you don’t use your OD any more.

This was the situation my sister got herself into. Her bank wasn’t willing to work with her because her credit rating sucked. So what she did is stop her direct deposit, opened another account with another bank and then slowly paid off her debt with the old one.

Kind of an underhanded move, but hey, it worked.

10

Congrats on quitting smoking! Of course that helps. In other ways, your priorities are out of whack compared to your income level, but it’s not unmanageable yet. You can work on a few things:

  1. Find a roommate ASAP.
  2. Let your girlfriend come to see you sometimes. Or resign yourself to visiting her less frequently. Whatever it takes to cut back on your visits to her. She doesn’t want you to bankrupt yourself for the sake of the relationship, does she? If so, then she’s a bad girlfriend anyway.
  3. Stop taking taxis, ever. You can walk to work for a couple months and save up for a bike. Or you could take the bus, which has gotta be cheaper than that.
  4. Can you spend less on food? I’m in the US so I can’t compare what you’re spending on a dollar-for-dollar basis, but you are probably not squeezing as much out of your food budget as you can. Get a rice cooker and look up recipes online. A big bag of rice, beans, spices, and some frozen chicken fryers can go a very long way. Rice cookers are really versatile and can handle lots of different kinds of pasta, too. I’m pretty sure you can make macaroni or ramen in one, as well.
11

It all boils down to income and expenses. Income has to be greater than expenses.

List all your expenses, from largest to smallest. Be sure to add the little stuff up, a phone costing 50 per month is cheaper than 10 taxi trips at 6 each. Work down through the list, largest expenses first. Is there anything you can do to reduce or eliminate them? Don’t completely eliminate luxuries but try to make them infrequent and not too costly.

Is your income flexible at all, can that be increased with more hours or a second job?

Walking is free and makes you healthier, win/win.

12

Cooking for yourself is good, but how are you working that?

Are you buying small packs of meat, veg, rice, etc on a daily basis? If so, you can cut your food bill at least in half by buying in larger packs.

For example; in most UK supermarkets, a whole chicken is cheaper than a pair of prepared chicken breasts. You can easily get half a dozen single-person meals out of a whole chicken - if you have freezer space, you can cook for four and freeze three portions for later.

Likewise, a microwave pack of rice for one or two people costs at least twice as much as a kilogram bag of uncooked rice that will make perhaps 8 or 10 servings. You don’t have to buy in enormous bulk to start saving.

13

I agree with everyone else - your first and very important step is to write down where every penny goes. This is usually a very eye-opening experience for people - “I’m spending how much on coffees at work?!?”

The second step is going over that list and seeing where you could make some changes to save money. From the sketch you’ve given us so far, the money leaks I see are:

  • A one bedroom apartment where you could be in a two bedroom with a roommate. Two bedroom apartments are usually not twice as expensive as a one bedroom, and many, many young people take advantage of that when they are early in their careers.
  • Taxis. Bus, train, bike, walking are all better options.
  • Seeing your girlfriend in Ireland too often.
  • Living in overdraft.

Some frugal tips for you - shop the sales at your local grocery store. I hate paying full price for anything - the sales come along about every four weeks or so, I know what we always use, so I just buy the usual stuff on sale. Pre-packaged foods are horribly expensive, too - cooking from scratch is almost always cheaper.

Local thrift shops for clothes - they usually have good quality stuff in there if you look long enough. Retail prices for clothes is one of the biggest scams around.

If you want to treat yourself (and you still should, once in a while - living within your means is a marathon, not a sprint), get your treat at the grocery store, not a restaurant. You can get a nice steak at the grocery store for a quarter of the cost of a steak at a restaurant.

14

You’ve got to make your lifestyle fit into your existing budget, NOT making your budget accommodate your lifestyle.

I took a class in the 6th grade here in the US that was about simple financial planning (balancing a checkbook, making a household budget, etc.) and several key factors have always stuck with me:

25% of your income should go to housing. No more. Up to 33% if you don’t have a car. More than that, and you’re going to be what they call “house poor”… constantly scrimping and doing without so that you can afford to live in a certain place. If you get paid weekly, look at your take-home pay for one week, and think about THAT as your target rent amount. Maybe you need to find a roommate, or rent a room in someone’s house to get closer to that amount, but it sounds to me like your main financial problem in life is that rent is costing you way too much.

Use cash instead of “card” to make your consumable purchases. (Food, clothes, toiletries, gas, entertainment and luxuries) by withdrawing the maximum amount you can afford to spend on all of the above per pay period, and sticking to it, religiously.

Write a check (or use a debit card) to pay for your utilities, services, housing, insurance, etc. Do not add recurring expenses without adding them to your budget and being certain that they won’t topple your budget.

Leave yourself a buffer of 10% of your take-home pay, to cover unexpected expenses that don’t fit into the “recurring” category.

So, basically, this was the “moral” of the little basic financial planning class from way back when: Live within your income. Save 10% minimum. Make more money if possible (go to college, figure out what the next rung on your income ladder is and start figuring out how to get there, work extra hours, or a second job if you need more income, etc.) and be AWARE of every cent you spend.

15

I’m assuming by the £ sign that you live in the UK, where do you do your food shopping? Is there a Lidl or Aldi near you? They are often considerably cheaper than other supermarkets.

Your rent is horrifically high, have you made enquiries about any social welfare benefits or payments you might be entitled to? Pop into your local dole office and ask, explain your situation fully.

16

I did, however they rejected it on the basis that I earn too much, I even get less in terms of tax credit.

I should add I used to get £200 a month in terms of tax credits on top of my wage and that contributed towards my pay to the rent, so theoretically, I only paid £215, now that’s gone, I don’t know as to whether I’m entitled to it anymore.

17

You need to find a cheaper place to live. You can’t afford where you are.

18

Does your rent include utilities? Total cost of rent/mortgage plus utilities should not exceed 1/3 of your take-home pay, and that’s the “goes to 11” limit.

Drop the taxis. Walk, bus or see if you can find someone who drives and who can take you.

Buying and cooking in bulk takes less money but also less time. I live alone, and if I buy so much as a head of broccoli and a couple of roasting peppers I have waaaay too much; so, I cook it all and freeze it in portion baggies (they don’t have to be freezer baggies, reused ones work fine so long as they’re clean and don’t have holes).

And yeah, twice a month going abroad to see the gf is way too much. If she can’t understand “I can’t afford it”, you guys have a serious problem, not just you-individually.

19

Or have a look at local greengrocers. IME, they tend to be the cheapest option. The veg probably doesn’t look as perfect as the stuff in supermarkets, but it all tastes the same.

Also, you are paying far too much of your income on paying someone else’s mortgage.

20

Cheap housing!

I cannot recommend it highly enough! It empowered me to save money for several trips I took around the world. It’s not for everybody, but here’s how I made it work for me. Start looking at units in the cheapest part of town, that you might be comfortable living in. Keep looking. Remember a coat of paint covers a world of sins, is cheap, and takes a weekend to do! You can stylish it up; funky or retro, shabby chic, whatever you can do on the cheap.

Life will get easier almost immediately. Suddenly you’ll have far more ‘lifestyle’ money or ‘saving’ money, to throw around.

If you’re seriously telling us, you’re taking taxis to work, and visiting Ireland every couple of week,s on the one hand, and you can’t imagine where your money’s got to, on the other, then I challenge you to tell us how much cab fare to work costs, or return fares to Ireland!