Key Post: Sorting out a budget

M

Marion

Guest
This was originally posted by ANon



If anyone could help or advise me I would really appreciate it. Myself and my partner are (finally) trying to get our finances across the board straight. We are trying to put a budget together as our spending on the Visa card is out of control. I want to get us to the stage where we have a budget for all the bills (from heating/Esb to mortgage/savings etc). My hope is we will then divide our surplus money between us to spend as we want.

First the facts.... We have lived together for 6 years (not married). We have one son (5). We have a mortgage of 160,000 Euro over 30 years. I'm 30 and my partner is 28. We have all the usual outgoings with no major loans apart from 2 car loans. We have also been approved to borrow 20K on TSB one plan (over 10 years) which we hope to use to finish off our house (tarmacadum etc). We will be using this loan to pay for car insurance/tax etc but will adjust the payments so we have it paid off each year (works out cheaper than paying insurance over 12 months with insurance company).

We have 2 cars (biggest hole in our finances but it is needed as we work different hours). We both earn 33K per year giving us a monthly take home of E4,145. We also receive child allowance of E130 per month giving a total of E4275 per month.

We are currently with AIB (all our current accounts and Visa) and our mortgage is with TSB. I'm hoping once we have our budget in place we will setup all our banking with TSB (no fees) and then use direct debits to manage our finances.

Is it possible for me to attach the draft budget I have created so I might get some feedback on our outgoings or should I post the contents directly into the post?
 
Re: Trying to get straight - Advice/help needed

Hi Anon - Congrats for taking the first steps to getting your spending under control. We don't have any facility for attachments on this board, so you will need to include details in your next post. My immediate comments would be;

- Do you really need the 20k spend on home improvements now? Why not hold off until you can save up that money, rather than getting yourself into further debts.

- I'd be more worried about my mortgage rate than direct debit charges. Are you on a competitive rate from PTSB (who are generally not famous for their cheap rates? You might be able to save yourself thousands of euro by getting a better value mortgage elsewhere.
 
bills

You can contact the ESB (and bord Gais, but I don't know if you have gas) and get them to switch you to a budget account, whic averages your costs over the year. It means you know how much the bill will be each month.
 
thanks for the replies so far

Rainyday & Terrysgirl thanks very much for your replies. To answer your questions first:

" Do you really need the 20k spend on home improvements now? Why not hold off until you can save up that money, rather than getting yourself into further debts."

We would only use part of the 20K for improvements now. Roughly 5K to have our drive tarmacadumed. We plan on using the loan to pay car insurance/tax/fees for a degree I'm taking up (we will adjust the repayments to pay insurance/tax over a year - my course fees over 5 years (2K per year))will not be using the full 20K though.

" I'd be more worried about my mortgage rate than direct debit charges. Are you on a competitive rate from PTSB (who are generally not famous for their cheap rates? You might be able to save yourself thousands of euro by getting a better value mortgage elsewhere"

I'm not 100% sure of our current rate. We are on a variable mortgage but we have already re-mortgaged about 12 months ago from AIB for the same reason you outlined - it was cheaper with the TSB. Even though we have a mortgage of E160K our house is valued at E300K.

"You can contact the ESB (and bord Gais, but I don't know if you have gas) and get them to switch you to a budget account, whic averages your costs over the year. It means you know how much the bill will be each month"

Thats an excellent idea. I will def check this out. We have oil fired central heating.
 
The details

So here is the budget set-out so far. Please feel free to comment/advise...

Outgoings &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp

Mortgage&nbsp &nbsp &nbsp &nbsp € 629.00&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
PIP account (for my son)&nbsp &nbsp &nbsp &nbsp € 73.49&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Life insurance&nbsp &nbsp &nbsp &nbsp € 24.28&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Home insurance&nbsp &nbsp &nbsp &nbsp € 70.41&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Refuse collection € 22.91&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Health insurance&nbsp &nbsp &nbsp &nbsp € 18.20&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
car loan 1&nbsp &nbsp &nbsp &nbsp € 258.00&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Car loan 2&nbsp &nbsp &nbsp &nbsp € 331.05&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
car tax 1 €30.25 (363 yearly)&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
car tax 2 €12 (144 yearly)&nbsp &nbsp &nbsp &nbsp
car insurance 1 &nbsp &nbsp &nbsp &nbsp €56 (680 yearly)&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
car insurance 1&nbsp &nbsp &nbsp &nbsp €58 (700 yearly)&nbsp &nbsp &nbsp &nbsp
Petrol car 1&nbsp &nbsp &nbsp &nbsp € 80.00&nbsp &nbsp &nbsp &nbsp (monthly)&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Petrol car 2&nbsp &nbsp &nbsp &nbsp € 100.00&nbsp &nbsp &nbsp &nbsp (monthly)&nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp
Long Term Savings&nbsp &nbsp &nbsp &nbsp €40.00&nbsp &nbsp &nbsp &nbsp
Holiday savings&nbsp &nbsp &nbsp &nbsp €208.00
One plan loan&nbsp &nbsp &nbsp &nbsp € to be finalized.
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Heating € 66.00 (to give yearly allowance of E792)&nbsp &nbsp &nbsp &nbsp
ESB&nbsp &nbsp &nbsp &nbsp € 70.00&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Eircom&nbsp &nbsp &nbsp &nbsp € 20.00&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Sky&nbsp &nbsp &nbsp &nbsp € 30.00&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
UTV (calls) € 35.00&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
TV license € 14.00&nbsp &nbsp &nbsp &nbsp
Misc&nbsp &nbsp &nbsp &nbsp € 50.00&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Food shopping € 600.00 (per month)&nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Total&nbsp &nbsp &nbsp &nbsp € 2,896.59&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp

In-coming&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
wages 1&nbsp &nbsp &nbsp &nbsp € 2,066.00&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
wages 2&nbsp &nbsp &nbsp &nbsp € 2,079.00
Child allowance € 109.00&nbsp &nbsp &nbsp &nbsp
&nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp &nbsp
Total&nbsp &nbsp &nbsp &nbsp € 4,254&nbsp &nbsp &nbsp &nbsp

Surplus = €1,357.41
 
Re: The details

Home insurance € 70.41
Seems a bit high. Have you shopped around and are you insuring for the rebuild amount of the house as oppose to the value of the house ?
Where's the visa bill or did you pay that off by re-mortgaging ?
I would say that this is quite a well balanced budget going by these figures.
 
Re: The details

Should you give yourselves some entertainment allowance? Presumably you're not going to live like hermits for the next few years. You've a better chance of limiting what you spend if you allocate a specific budget amount.

I wonder about the wisdom of funding a PIP account and your long-term savings while still paying off expensive loans. From a pure financial sense, it makes little sense to be borrowing at 8%-9% on one hand while investing to earn 3% or 4% on the other. Why not redirect this money to repaying your loans quicker?
 
looks good

Hi there,

That looks good. Have you managed to also figure out where you're overspending at the moment? That's really important to do if you're going to avoid it in the future. Presumably the excess you've got will then go to paying off the loan you're planning on getting? Clearing credit cards? Or have you done that already? I'm sure it depends on the person but I've had to budget down to the last cent to make sure that I spend my money where I want to spend it. I tried doing a budget which left me with a couple of hundred each month, I wanted to have it there as "just in case" money and then planned to pay whatever was left of it at the end of the month onto my credit card thus clearing that even quicker. Problem was that I never seemed to be able to hang on to the bit extra and it all went on very non-essential things I could have done without. You should think about if it would work better for you to allocate almost all your money in the budget to something, be it extra savings, extra loan repayments or whatever.

I found Alvin Hall's book Your Money or your Life very interesting and helpful reading and there is another thread here somewhere with a few other reading recommendations too. Perhaps one of the more experienced users could find it for you. (I've only gotten around to registering after five or six months. It'll take me another while to get the hang of anything more complicated than just posting plain text!)

On another note, would it be more economical to consider switching to gas heating? (I'm a bit of a slave to advertising and Bord Gàis would have you believe it anyway).
 
savings v. loan

Rainyday makes a good point about whether it's better to pay off loans rather than saving. In general it probably is but psychologically speaking I find it very depressing to not have any saving at all. I'd rather put forty quid in the credit union every month than pay forty more onto my credit card even if it does increase the length of time I'll be paying off my credit card. It probably (definitely?) isn't the most practical thing to do but it just makes me feel a bit more like there is light at the end of the tunnel.
 
Thanks for the reply's...

"Home insurance € 70.41
Seems a bit high. Have you shopped around and are you insuring for the rebuild amount of the house as oppose to the value of the house ?
Where's the visa bill or did you pay that off by re-mortgaging ?
I would say that this is quite a well balanced budget going by these figures."

Rate is with AIB and gives us unlimited contents cover. We have quiet a few valuables so we wanted high contents cover. House is insured for rebuild cost not house value. The visa bill is payed off each month. We have enough surplus at the moment to pay it off each month but were not allocating cash toward the bills and items listed in the spreadsheet which means that we are screwed for the month when bills arrive. We both want to use our surplus cash to buy things/eat out/entertainment etc as apposed to using the Visa all the time and hence spend what we don't have.

"Should you give yourselves some entertainment allowance"

As above we hope to use our surplus cash for entertainment etc.

"I wonder about the wisdom of funding a PIP account and your long-term savings while still paying off expensive loans."

PIP account was setup for my son when he was born. We hope he will use it if/when he goes to college. I understand your reasoning rainy but I feel this is something we cannot afford to pay/leave until loans are payed back. Also car loans are fixed. Only variable loan is mortgage and one-plan.
 
Reply....

"Have you managed to also figure out where you're overspending at the moment?"

Tbh our visa spending is not out of control to the extent we cannot pay it off on a monthly basis. Over the course of the month we eat out, buy stuff for ourselves etc etc and by the end of the month all our cash is gone on the Visa bill. Our idea is that buy using the spreadsheet we will have all bills covered and save a bit and use our surplus cash instead of the visa. We (hope) to use the visa only for petrol and food shopping. That was we know exactly how much we are spending. It's very difficult to judge how much your spending when you always use the visa card!!

"On another note, would it be more economical to consider switching to gas heating?"

Not sure if it is possible in our area tbh.

"rather put forty quid in the credit union every month...."

I totally agree. It's only E40 but at least you feel you have some sort of loing term plan...
 
Just to clarify...

Just to clarify again I don't feel we are in a dire financial situation. I just feel our spending habits are very bad. Spending on the Visa gives us no value for how much we are actually spending. If we go to the spreadsheet option all bills will be covered and we can use the surplus cash to eat out etc etc as opposed to constantly using the visa.
 
Re: Just to clarify...

but I feel this is something we cannot afford to pay/leave until loans are payed back
Click to expand...
I understand that it may be 'psychologically' helpful to allocate this money to your sons education fund now. Just to be very clear, my point was not about a timing issue.

You (and by extension your son) will be financially worse off as a result of your decision to invest money at say 3% return while borrowing money at 8% interest. You will be financially better off if you;

- redirect all spare cash to clear your non-mortgage debts over a couple of years
- then redirect spare cash (including the interest saved) into your sons education.

I do think that if you are serious about budgeting, you should put some limit on your monthly entertainment and redirect leftovers into your variable rate loan to get that cleared as soon as possible.

Also, what charges are you paying on your PIP investments. Some of the big bank PIPs were very poor value for money (5% entry fees).
 
Re: Just to clarify...

Hi there

You could check with your oil company if they offer a payment plan. I pay my oil company an amount every month regardless of when I take my fills of oil. So sometimes I'm in the red with them and sometimes I'm in the black. They don't charge interest and each year I usually have a surplus with them and they send me a cheque for it with no hassle (it pays my car insurance, so i use it as savings-of-sorts).

Rebecca
 
Oil company

Rebecca

Which oil company do you use?

whocares
 
Re: Oil company

Jones Oil - I use the Athlone branch, so I'm not sure what the situation in the rest of the country is.

It's very helpful because I can order a full fill of oil and then get the cheaper price whereas my old oil company used to charge a premium for smaller amounts. The price per litre with Jones seems to be in or around the going rate here - any differences were definitely not worth switching.

Rebecca
 
Re: Oil company

Anon:

Maybe I missed something here but it looked to me like you were €1300 surplus each month.

If the Visa Card is the problem.. use the Oneplan to kill off the balance immediately; continue to pay the Vias off to a NIL balance or else realise that you are just one of these folk who 'believe' that they will reduce the balance over time and this is a punishment of some sort.

The use of 'One-plan' needs careful management for the simple reason that a 10 or a 30 year period to pay for items used now is not great.. but given that you may have built up a large balance on VISA (you did not say how much) ..this seems to me to be the issue.

Micromanagiing every other item would drive me personally insane, but a waste of time until that credit card is managed, and that means a Zero balance at the end of each month.
 
Thanks again for the replys

Rainy I understand where you are coming from regarding the PIP account. Fact is we have the account for 4 years. If we pull out now it will not have had chance to mature and we will make a loss. Our financial services advisor tells us the policy will mature and give us a good return as most of the shares bought in the policy have been very low over the last 4 years.

"Also, what charges are you paying on your PIP investments. Some of the big bank PIPs were very poor value for money (5% entry fees)."

I will check this and post back.

"If the Visa Card is the problem.. use the Oneplan to kill off the balance immediately"

The visa balance, as such, not a problem. We do manage to pay it off each month. As I said before we want to get to a stage where we use our surplus cash instead of the card so that we have visability each month to how much we are spending.
 
Re: Thanks again for the replys

If we pull out now it will not have had chance to mature and we will make a loss.
Click to expand...

Just to clarify - I'm not suggesting that you pull out the cash that is already in there. I'm suggesting that you stop making further future contributions to the fund. Leave what is already in there to grow, but don't throw more cash into that pot while paying 8%-9% interest on your other loans.

You might also want to check if your financial advisor is continuing to get a slice of your monthly contribution in commission - that could possibly lead to a biased view on the matter.

Note: I know my posts come across as abrupt & dogmatic. I'm not telling you what to do. I'm telling you what I would do in your shoes. Obviously, you will pick & choose what suits you best. Best of luck.
 
Re: Thanks again for the replys

anon, I'm in pretty much the same situation as you. I have a detailed spreadsheet etc etc and I can see I have disposable income at the end of every month, but I never seem to be able to retain it, it just flits away.

What I do now is use the VISA only for large purchases, internet purchase, phone purchases.

Use my laser card for practically everything else..... Easy to track spending online.

If I have estimate, for example, that I have 600 left over in cash every month, then I would put 200 into savings (online) after each payday, and then withdraw 400 in CASH. The 400 cash is in the kitchen and you take some and put it in your wallet. When you use it and run out you will very easily see how much cash it left and how many days are left in the month!

Honestly, using cash it the only way I have found that works.

My cash covers any purchases that are non-repeating (like monthly bills etc). So it would cover meals, entertainment, clothing, gifts etc.
 
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