Thanks YNAB - we can't afford this now (yet)- but we will soon :-)
Thank you YNAB.
After inputting all our current balances, bills, monthly and now annual, considered some of the things that will happen during the year, car repair etc, we have now realised why we have not had the money available each month we think we should do based on our income and immediately obvious bills.
We do not have much debt out side of a mortgage just a very small loan amount remaining (but this has been much higher and we have just let it run down with standard payments), but we do frequent our credit cards and then get frustrated we we are not putting money away. We also get annoyed when bills come up we know will happen but just ignore about until they happen by focusing on just the monthly outgoings. We then have to dip into our savings to pay for them, which may seem normal, but as we are not focused on the bills dipping in to the savings is like raiding it rather than planning for it.
We also do not have a sods law emergency fund or an emergency for 3-6 month of bills formally set up. We have money to cover an EF and about 2-3 of bills, but nothing formal organised or even set up in our consciousness to deal with, anything we need like that comes out of one savings pot (with really crap interest at the moment).
So, after totalling up the amount we need to be budgeting each month it has become very clear to us why, even though we have a very good combined income, we don't seem to be further ahead than we are and why we don't seem to have more available money.
By listing everything out we have realised that over the years we have just added to our regular expenditure without understanding the overall impact, a few £'s here, £15 there etc, all adds up to lot of monthly outgoings. We just saw we weren't in the red each month so we must be OK.
Whilst I imagine a well organised and set up spreadsheet could of told us this, the ease of YNAB (even after just looking at if for 3 days), the blog and the video tutorials has motivated us to understand the true picture of our finances.
Realising this now has made us wonder what we would do if the stuff hit the fan at some point. We are good when times are good, and we are fortunate times have been good so far, but without doing this with YNAB's method if 'it' did hit the fan I imagine we would be up the creak without paddle and under major stress.
We now have a list of ALL our outgoings and have put a monthly budget value against them all. We have included a renewal, expiry date or cancellation options for annual bills, subscriptions or memberships, and we have also listed everything as a true need or a nice to have, and where it is a need highlighted it to see if we can reduce the amount by changing provider etc.
We have also been putting money away into future investments, i.e. Pensions when in reality we should have been putting a little less in for now to clear all debt, then put it back up to a level we can truly pay ourselves without boring off others (credit card) for day to day expenditure etc.
It is clear to us that somethings are going to have to go if we are going to shift our focus. We haven't yet set any finance goals like paying off the mortgage early etc, we wanted to get a picture of our true position first.
Reading the YNAB and listening to Dave Ramsey (but thinking about his steps in relation to the UK and adjust them accordingly), our first goal is to kill the debt, the credit cards and loan as well as setting up the sods law emergency fund by moving money from the main savings pot into it. Then go through and kill all unnecessary expenses whilst trying to reduce the monthly cost of needs by moving provider if we can, or downgrading to a more suitable tariff or plan.
We are still at the beginning and haven't set a full month of budget (this will be in May), but we can see some quick wins (pay off credit cards, set up EF, kill some subscriptions) to start and then get into the routine of regular budgeting from a much better playing field. After a few months if budgeting we will sit down and set our self some goals.
We are very happy to be going through this, have stood up and accepted our mistakes, and can genuinely see a better future.
Yeap it is great, seeing so much clearer now. Only small things to start as we are only just going through our finances in preparation to budget for May from a much better place and ending out April in more control than we have been.
Today I have saved us £587 by cancelling or turning off auto-renew on subscriptions as well as downgrading one service that we don't use enough ,and we still have £81 to decided if we want to cancel. £34 a year we are keeping and going to budget for.
My wife also remembered that she still hadn't sorted out her Union fee's which should have been reduced by 50% after she went part time 9 years ago we have just calculated that we given £648 to her Union for nothing at that is very close to the cost of our holiday this year. On Monday she is calling them to reduce the amount she pays and we think she is entitled to a 12 month rebate, so that could be £72 coming back to us.
And I am only just getting started :-)
Congratulations on starting the journey to your better future!
One of the unexpected benefits for me was seeing those forgotten subscriptions come through throughout the first year and being intentional about what I wanted to keep up vs cancel. (And those forgotten true expenses - not so fun, but necessary! 😂)