Saving as much as I spend

Posted by louisa on Thursday 3 March 2011 in frugal, low spend 11, personal finance | 0 comments

Following the 20 Financial Milestones for your 20s(ish) list I worked through at the start of February, I’ve started a new separate savings account for “saving-as-much-as-you-spend” thing.

I ummed and aahed about adding it to my normal savings account but I like the idea of starting its own dedicated account so I can really see it add up.

I’ve decided not to include all of my spending in the “to-save” pile – just the stuff that feels optional or a treat/luxury: books but not bus fare, meals eaten out but not food for meals cooked at home, pretty craft stuff but not pet supplies. My very own VAT ;)

From the whopping £242.52 which I spent in February, £137.16 was myVAT-able so that’s the opening amount for the new savings account.

I’m doing this for two reasons: firstly, I need to get back in the habit of saving money regularly again as during my lean-wage/self-employment over the last five years, my saving has been adhoc at best but more frequently, for long stretches, not at all – the savings I do have now date almost entirely from when I was employed. To start saving though, I’m going to have to free up some money from somewhere and that’s where the second reason comes in: I’m hoping it’ll help me reduce my consumption and make me more mindful about what I do spend. Those myVAT-able things now cost twice as much as far as my current account is concerned – I won’t (I WON’T) go into debt or start putting things on credit cards so they only way to live within my means will be to cut back. Of course, the theory only works because I know there is plenty of slack that I could cut back on without it particularly affecting my life for the worst – it will be interesting to see how it is in practise though.

20 Financial Milestones to Reach in Your 20s (ish)

Posted by louisa on Wednesday 9 February 2011 in personal finance | 1 comment

A list of “20 Financial Milestones You Want to Reach in Your 20′s” has been circulating around many Generation-Y-ish personal finance blogs recently. I’m not quite in my 20s any more – I’m 31 – but it feels more like a stage of life thing (no kids, first steps on property ladder, student debts etc) rather than an exact age, so it would be interesting to see how I’ve done.

(The original list is from the USA but I’ve UK-ised it a bit to make it more relevant – but stuck to similar sentiments. The bits in italics are explanations from the original list.)

# 1 – Finance a dream vacation…in cash – done
We went to Russia in 2005 when we were 26 – somewhere I’d always wanted to go. We had a week split between two of the top hotels in central Moscow & St Petersburg, with a night in a first class sleeper inbetween. It was lovely, expensive but lovely.

We paid for the hotels & our flights on credit cards for security reasons but they were paid off in full the same month so I guess that was paid for “in cash”.

All our other holidays in our 20s – mostly city breaks around Europe or weeks in shabby-chic cottages on the coast – were actually paid for in cash or the same credit-card-then-immediate-pay-off arrangement. They were all dreamy :)

# 2 – Pay off your student loans – done
I came out of university with about £8,000 in debt – £1250 in an interest-free (for two years) overdraft, the rest as actual student loans. I paid off my overdraft within two years of graduating and finished paying off my student loans in the March before my 30th birthday. (I could have deferred payment after my salary dropped when I became self-employed at 26 but decided to keep paying.)

# 3 – Automate paying your credit card bill in full – done
Yes, but only when I was about 28. Before then, I only paid off the minimum automatically so, in theory, I could manage my cashflow better in lean months but I pretty much paid it off in full every month anyway so finally fully automated it.

# 4 – Get rid of all bad debt – done
A good way to see what bad debt and good debt is is by asking yourself if the underlying asset appreciates or depreciates in value. If the asset appreciates, like a house, than categorize it as good debt. If the asset depreciates, like a car, etc… then it’s bad debt.

The only debts I had were my student overdraft/loans and my mortgage. I’ve still got the mortgage but at the moment, that’s not “bad debt”.