So, I found a house I want to buy. £90,000, kind of cut off from humanity (it’s in Witchford), absolute state – holes in the kitchen floor, terrible old windows, that kind of thing. I dread to think what bad bits the estate agents *didn’t* photograph. Satanic scrawlings on the ceilings, probably, and the home-made gibbet in the back garden. Anyway, it was a “fixer-upper”, or “unique investment opportunity” in estate agent speak, and I kind of wanted it.
Thing is, £90,000 is a lot of money for anyone, but especially so for someone who’s only just managed to get out of debt for the first time in 10 years or more. Add to that the fact I’ve just gone from full-time working to three days a week – and the associated pay cut that entails – and it’s even further away. So I went to see my bank manager, and I sat down with three months’ statements and a spreadsheet, and I set myself the ambitious goal of saving £10,000 in one year.
Going by my current salary, that leaves me just £2,000 to survive on for the next year. Thank the lord for freelancing, then; but still, it’s a tall order. I’ve done monk months (where I save as much as possible by not going out) before, but this is a whole new level. Here’s how I’m going to do it – so you can maybe pick up some tips if you want to do similar, or offer advice or maybe spot the flaws.
Let’s, for the sake of nice round numbers to demonstrate with (and because in my case it’s fairly close to the truth) assume a monthly take-home of £1000. Of course, if your circumstances are similar (renting, single, dull) but you earn more then conceivably you can save more.
I’ve worked out what my monthly unavoidable outgoings are. I’ve over-estimated a little, and I’ve also added in annual costs such as car insurance. I’ve included (for the first time) a gift allowance for birthdays etc, although I’ll need more over Christmas and less in the new year, when no-one I know was born. These outgoings basically include rent, insurance, bills, pet insurance, TV license. Anything which is a scheduled direct debit. When you’re looking through your statements at this point, identify anything you can do without. For me it’s regular haircuts (back to shaving my head). Let’s say this comes to £500 a month.
Next up I looked at fuel, food, cash and other expenses. Books, music, clothes – anything like that. I surprised myself how much cash I take out every month – most of which I then couldn’t really account for. I think a lot of it goes on food, some on books, and an amount on going out. So that has to stop. This part of the exercise is really just about having a bit of a wake-up call over how much you really spend.
Finally, a fair chunk over the three months I was looking at went on debt repayments. These are now gone, as all my debts are clear. I can’t stress this enough: clear your debts before you start saving. With interest rates how they are, you won’t earn anything on savings, it’s just a case of putting money aside. If you do this while you’re still paying interest on credit, you’re just throwing money away. It’s far better to pay everything off first.
So what I found was that – quite frighteningly – I was spending pretty much what I earnt, and all of a sudden my income has gone down massively. Remove debt repayments and I’m a bit better off, but still living beyond my means.
So I worked out a weekly budget for myself. Let’s say I spend £20 on petrol a week, maybe £25. Then food; with judicious use of a freezer and making sure nothing goes to waste, and – most of all – not buying sandwiches from Tesco or Waitrose but making my own – I think £25 a week is more than enough. So I set myself the weekly budget of £50. Add a monthly buffer of £50 and I get the nice round number of £250.
So the plan is simple. On pay day, take £250 cash out of the bank. Take it home and put £200 in a safe place. The £50 you now hold is all you have until next pay day, whatever happens, so the first thing you’ll probably do is make sure you have petrol and food to last the week. Which may well leave you with as little as £10 for the rest of the week, aaargh.
At the end of the week, what’s left from your £50 goes in the penny jar. £50 again the next week. The extra £50 you should have acts as a buffer if payday falls over a weekend and you have more than 4 weeks to wait (rarely) or is put in the penny jar as well.
If all goes to plan, you’re saving at least £250 a month, maybe even up to £300 a month. That’s £3,600 towards the total, so all I then have to earn from freelancing is £6,400.
Don’t believe it’s possible to live on £50 a week? Jobseeker’s Allowance for someone of my age and circumstances would be £64.30 and that would have to include rent and bills. Puts it in perspective, doesn’t it?
sally
will be interesting to see how you get on….. so keep us up-dated