YNAB after a year – a UK story

I’ve got five years left on the mortgage. Not badly paid. Last year I forced myself to take stock of my financial future.

I had no debts (other than the mortgage) and yet every month I was juggling money around my different jam jar type accounts to make sure the £500 to £1000 credit card bill was paid off. I couldn’t understand why.

I’d also been paying into my pension fund fairly consistently for years but had no idea if I was paying enough.

I was getting nowhere fast.

So, I took the plunge and signed up to YNAB. I took part in half a dozen workshops and spent half an hour every Sunday morning updating my budget and within the first month it was obvious. Like so many of you I was looking at the balance of my current account at different times of the month with no consideration for inevitable future expenses. Without a tool like YNAB to monitor my complex outgoings it is impossible to forecast for the future.

The results have been astonishing. I no longer use a credit card. I have several £1000s in my current account now (instead of hovering close to £0) and I have increased my monthly pension contribution from £135 a month to £260 a month and it hasn’t hurt at all. If I maintain this, I will be able to retire eighteen months earlier than I thought.

I’ve been able to take the 721 transactions from the last year to build a granular picture of what I am spending my money on. Using this data I now have a very detailed idea of what I need to retire on.

I no longer worry about Christmas and holidays. I no longer get a shock every time the home insurance bill arrives.

 

My key lessons;

·         Get rid of the credit card as soon as you can. There’s a lot of debate on YNAB about the credit card. I used some of my existing savings to pay of my credit card once and for all and have not used the credit card since. The money I used to use every month to pay credit card balances now goes into my savings.

·         If you haven’t already, reduce the number of bank accounts you have. I had half a dozen. I was using them like jam jars. One for car expenses, another for holidays, one for rainy day etc. If you use YNAB correctly there really is no need. Put it all in the account that is accessible and gives some interest. Life will be so much easier. If you live in the UK, I recommend Nationwide FlexDirect account. It has a fixed interest rate of 5% AER fixed for a year on up to £2,500, as long as you haven't had a FlexDirect account before and pay in £1,000 or more each month. Also, there is a £100 bonus if you are recommended by a friend. PM me if you would like a code (I’ll also get £100).

·         If you are thinking about retirement, and you should be, you need to do your research. For UK YBNABers I recommend: FT Guide to Saving and Investing for Retirement: The definitive handbook to securing your financial future. There are also some great episodes pensions on the Meaningful Money podcast. IOS: https://itunes.apple.com/gb/podcast/meaningful-money-podcast-making/id581790263?mt=2&ls=1 Android: https://subscribeonandroid.com/meaningfulmoney.tv/feed/podcast/

Most importantly, enjoy life. It is not all about obsessing about budgets and thinking about the day you retire - and having greater financial security will help,

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  • Firstly, congratulations.

    Personally, I'd revise the first point to say 'get rid of the credit card DEBT as soon as possible'.
     If the spending is already fully budgeted in your categories, then credit cards are just a payment choice. If you're in that situation, credit cards can have many advantages e.g. rewards, protection, allowing you to leave some £ in a higher interest account etc.

    Reply Like 6
    • monkeyhanger 

      Thanks Moneyhanger - but for me, the credit card is another complicating factor in balancing the budget.

      Credit cards rewards are relatively small, as are interest rates from savings accounts. 

      My aim is to make my budgeting as friction-free as possible and credit cards just don’t help me with that.

      Reply Like 2
      • monkeyhanger
      • No animals were harmed
      • monkeyhanger.1
      • 7 mths ago
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      • Reported - view

      Aquamarine Cobra If they don't work for you then you're doing the right thing for you.

      However, using credit cards merely as a different mode of payment is friction-free and actually makes my life easier. Credit cards are often portrayed as evil on some budgeting forums and they're really not as long as they're not misused. They're just a payment method that has advantages and disadvantages the same as any other payment method. It makes no difference to my budget which payment method I use. 

      Reply Like 3
    • monkeyhanger Agreed. I use my CC for any online or large purchases as the inbuilt insurance covers you if anything goes wrong.

      Thankfully, it doesn't often go wrong, but I remember when we ordered our first pram for our Daughter. Initially I was about to pay on my debit card at a local retailer, and I don't know what made me do it but instead I pulled my credit card out of my wallet.

      Two weeks later and the company went bust. I recovered the money within two days through my CC company. Two years on people were still trying to get some money out of the administrators if they had paid by cash or debit card.

      They have their uses, but you need to use them properly.

      Reply Like 1
    • Khaki Storm
    • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
    • Khaki_Storm.1
    • 7 mths ago
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    Agree! Congrats! I wish I could get rid of credit cards, but its the fraud factor that keeps us usung them.  We had our debit cards compromised and wasnt any fun.  However,  I pay the credit cards in full weekly.  Maybe its a bit much,  but I agree with you it can get out of hand quickly. Its you against a credit card company with teams of people thinking of ways to get you to spend more (points,  treats,  rewards,  special access,  etc. )

    Reply Like 2
      • monkeyhanger
      • No animals were harmed
      • monkeyhanger.1
      • 7 mths ago
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      • Reported - view

      Ben Khaki Storm That's where YNAB comes in. Don't spend it, if it's not in your categories.

      Reply Like 1
    • Ben Khaki Storm 

      Hi Ben, thanks for this. You and monkeyhanger have made me take a look at the UK state of card protection. There's a good summary here: https://www.moneyadviceservice.org.uk/en/articles/how-youre-protected-when-you-pay-by-card . Maybe, sigh, it would be better for me to start using a credit card again for some purchases between £100 and £30,000. On the other hand, Nationwide does promise protection for debit card fraud:

          "If you lose money as a result of fraud, call us and we’ll put the money back in your account       immediately and investigate. As long as you've made all reasonable efforts to protect your       personal details including your PIN."

      It's not a legal protection like that provided by the Consumer Credit Act and doesn't protect me if my holiday provider goes bust - but that is what travel insurance is for. 

      Reply Like 1
      • monkeyhanger
      • No animals were harmed
      • monkeyhanger.1
      • 7 mths ago
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      Aquamarine Cobra They're also really useful for things like security deposits when hiring cars.  It's possible but more difficult and can require you to have significant funds in your debit account.

      BTW, I'm not advocating for excess credit card use. I'm just arguing that used wisely they are simply an alternative payment method.

      Personally, I hate cash but I know that for many others going cash-based has significantly helped with the psychology of spending. We're all different.

      Reply Like 4
  • Aquamarine Cobra Thanks so much for the summary of your YNAB year. I have just started using the tool this month and it has already rewarded me with a sense of calm. Like you the potential shock factor of incoming bills has been reduced: I didn‘t need to sit down before opening the annual electricity bill because I knew I could budget for any emergency. 

    It‘s a personal (maybe cultural?) thing but the first debt I wish to eliminate is on my VISA card. I really only need to own one to book flights with certain airlines or if we need to hire a car abroad. Otherwise here in Germany, most people I know don‘t pay with a credit card. I have a group of English students here at the moment and they were shocked that they couldn‘t pay with their VISA for something costing 14€ in a shop. I left England to live in Germany 33 years ago, so I don‘t know if the students are typical for most people in the UK.

    Reply Like 2
  • Hi Aquamarine Cobra !

    Congratulations on this list of wins! Gaining awareness of your spending and being able to better plan for the future opens a number of financial doors. I know your second year with YNAB has even more in store! :)

    Reply Like 1
  • Aquamarine Cobra said:
    If you lose money as a result of fraud, call us and we’ll put the money back in your account       immediately and investigate. As long as you've made all reasonable efforts to protect your       personal details including your PIN

     If that's true, then great, hopefully you can take them at their word. I know over here in America, that's not the way banks treat you with debit card fraud. I don't have personal experience, but when a girl at my former job had it happen to her, it threw her entire life into turmoil for over two months before she finally got her money back.

      after watching that, and Hearing her phone calls almost daily with the bank, I decided I'd never carry a debit card in my wallet. 

    Reply Like 1
      • monkeyhanger
      • No animals were harmed
      • monkeyhanger.1
      • 7 mths ago
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      Bruce Handling of debit card fraud is MUCH better in the UK than the US. Different ball game.

      Reply Like 1
      • Bruce
      • Software Engineer
      • Bruce
      • 7 mths ago
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      monkeyhanger Good to know. Then feel free to use it. I possibly would if I had that sense of Security regarding its use. Although I do get good benefits from my CC, so I'd have to think about it.

       I guess it doesn't matter, though, since I'm here and don't trust the banks to protect my debit card.

      Reply Like 2
      • Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
      • 7 mths ago
      • 1
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      Bruce I got my money back from the fraud,  but we're right,  it wasn't immediate (about 3 week )

      Reply Like 1
  • Yes 

    Reply Like 1
  • Aquamarine Cobra

    I'm from the UK and have had a very similar experience. I went along the same lines as you. I have reduced my accounts down to two - one current account and one savings account. I initially went down to just my current account so I decided to get a credit card as a layer of protection for my money if my details were ever compromised.

    I went with a Tesco card which gives extra points for purchases over a certain amount. I only spend budgeted money on the card and pay the cleared balance each week when I review my budget (I do my review on a Thursday rather than a Sunday). I suppose I'm using the card like a debit card rather than a credit card, if that makes sense.

    I have noticed an increase in the points I get from Tesco which gives me a very cheap food shop every three months or so, but other than that I haven't noticed much of a difference. 

    I was concerned about using a credit card but I think the YNAB method tames credit cards. I never base my buying decisions on the remaining credit card balance. I limit spending based on the category balance.

    All this is to say, I think the fact you've used YNAB for over a year and the habits are now bedded in, credit cards are just another method of payment.

    Reply Like 3
    • Six Hats Regarding Tesco Credit Cards/Clubcard points - have you looked at the voucher exchange scheme rather than using the points in-store?

      Quite often you can convert 50p worth of food spending into £1.50 worth of vouchers. Useful if you go out or eat out often.

      Reply Like
  • I use the jam jar method at the moment - I get that I don’t need to if using YNAB properly, but as I’m in my first month I think I need to a couple of months to feel secure enough to get rid of some of my jars 😀

    Reply Like 3
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