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 Post subject: UK graduate - just starting out getting fit financially
PostPosted: Sun Jul 24, 2011 11:37 am 

Joined: Sun Jul 24, 2011 10:29 am
Posts: 3
Ok, here's the situation:

I'm 23, graduated last year & live with my boyfriend (and cat). I have volunteered for experience at a charity since graduating as well working part time as I struggled to get a graduate job. Then, 5 weeks ago, I began a temporary paid position working 27.5 hours a week at the charity on top of my part time job of 20 hours. The charity work could end in September or carry on for a few months, or I could be offered a permanent position.

I owe £10,500 in a student loan (1.5% interest; UK student loans are repaid in an income-contingent plan where 9% of everything you earn over £15,000 p/a is taken out with your taxes.)

Plus owe £1,800 in an interest-free graduate overdraft. A 9.5% interest rate will affect everything over £1,500 from 31/07/11. I will pay £300 off with this month's wages :)

I have a holiday booked for a few days in September. Not too sensible but I won some currency in a writing competition which will pay for some of it & I have already paid the flights and hostel deposit months ago so can't really cancel. Should get a chunk of currency for birthday presents next month as that's all I'm asking for!

My monthly income varies, so here are my figures from July (a 5 week month & good for commission - higher income than will be normal)

Income: £1750 after tax, national insurance & student loan.

Give £390 p/m to my boyfriend to pay for bills, this is how my share breaks down:

£100 to rent & insurance (absurdly cheap as we live in a council flat)
£54 to council tax (non negotiable, sadly!)
£155 to food (far too high! One of my aims is to reduce this)
£60 to gas & electricity (this is also quite high for our size of property; another aim is to reduce this)
£14 to internet
£18 to satellite TV (NOT my choice - my boyfriend loves it)

I also have these fixed bills I pay alone:

£35 for iphone bill (an indulgence but I'm locked into a contract so can't do anything about it now - we don't have a landline so at least I'm not paying for 2 phones)
£12 for insurance for said phone
£10 for contact lens delivery
£80 for a public transport pass (we don't have a car)

My budget for this month was:

£527 on the fixed expenses detailed above
£300 to pay off some of overdraft
£300 spending money (wanted to make this realistic - I have spent £225 so far with 7 days to go so pretty happy but want to reduce it next month)
I paid off the last £85 of my credit card with my first wage of the month, too :)

This leaves approximately £530 - at the moment I am popping it all into my savings account but will use some of it for my holiday. I really really want to tackle my overdraft (even though it's interest free at the moment, I just hate it!) but I know I ought to keep as much as possible as an emergency fund since my future is quite uncertain at the moment. I hope to have a full time graduate job with a charity in the next few months but the job market is still poor here.

My big aim next month is to cut some of my "spending" down - so far this month I've spent around £80 on socialising (which I'm happy with), £40 on charity & gifts (again happy with this) plus £25 on stuff for me and around £80 on what I class as "convenience spends" - mostly taxis, lunch at work instead of bringing my own, anything spent because I've been disorganised basically. This is the category I want to reduce as far as possible!

I really want to make sure I'm not wasting this money! Looking for advice on how to get to a good place financially when just starting out plus people to keep me accountable.


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 Post subject: Re: UK graduate - just starting out getting fit financially
PostPosted: Fri Jul 29, 2011 3:20 am 

Joined: Tue Jan 26, 2010 10:08 am
Posts: 113
Sounds like you're doing pretty well.

If your budget gets cut down 20% (for a 4-week month), then your income would be ~£1,400. Sounds like your fixed expenses + spending money are about £900, so that leaves £500 every month.

I would recommend putting that entire £500 into savings for now, until you know whether the job situation will become long-term. That would almost cover a month of fixed expenses (and presumably if you had no job, you would spend less on food and less on public transport).

After you get a permanent job, you can put £300 into the overdraft and £200 into savings so that you have £1,500 in a 3-month emergency fund. Those two things should be doable in 6 months. Then you're down to just the student loan (which I'm guessing you can pre-pay if you want), plus savings in the bank.

I don't know if you're familiar with moneysavingexpert.com, but I've used that in the past to investigate savings on bills/travel/etc. I've also used Groupon to get cheap entertainment (bowling, dining out), though that's hit-or-miss (most of it seems to be spa treatments and liposuction).

Re: convenience spending, I find it helpful to think about "paying" myself for the more inconvenient option. i.e. if a taxi home costs £20 but public transit costs £4 (plus, say, 10 minutes more time/walking), I'm effectively paying myself £16 to spend those 10 minutes, which is £96/hr. In those terms, it becomes way more palatable to take the cheaper option, even though obviously it's a mind-trick and not an actual £96/hr wage.

I'm guessing if you have an overdraft you don't have any savings…you should address that first, given the job uncertainty. After that, though, set yourself a deadline for knocking out that overdraft, and then the student loan (you can also add a bit to savings at the same time if that makes more sense). Once you've got definitive goals, it's pretty easy to stay accountable. :) (Assuming you keep posting!)

Good luck, sounds like you're off to a pretty good start already.


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 Post subject: Re: UK graduate - just starting out getting fit financially
PostPosted: Mon Oct 24, 2011 2:36 pm 

Joined: Sun Jul 24, 2011 10:29 am
Posts: 3
Well I'm nearly a month into that permanent job :D (and it's a job I love, too, with the charity I'd been volunteering for).

At the end of every month, I'll get £1,194.36 after tax, national insurance and my student loan payment are deducted automatically. I am meeting with my boss this week to set up a pension (I have a tiny one from a previous job I need to roll over).

My Dad's also giving me £150 a month towards debt payment/saving for a wee while. Not going to get into the family politics that have lead to this on here.

I drafted out a budget based on the 50/30/20 budget framework that's often mentioned on GRS. Realistically, my 'needs' are only about £450 and I tend to spend around £400 on 'wants' depending how sensible I'm being. This leaves me over £250 (£400 when counting my dad's money, which will not be permanent) to spend on savings and debt repayment.

To answer your question peaceofmind, no, I don't have any savings at the moment:

Current balance = -£600 (authorised overdraft set at £1,800, of which £1,500 is interest free).
No credit card debt for 3 months so have access to £500 on that.
I also have two empty savings accounts :$, £10,500 owed in student loans and a pension with around £450 in it just now (I am only 23!)

I guess I do feel that I don't need a massive e-fund at the moment as I don't own my home or have a car or have kids, I have a very tight support group of family and we (my boyfriend earns a little more than me) could (just) make it on one of our incomes. It would be miserable and very, very tight, and we would be eating rice and sitting at home every night. But we would be able to pay the rent and important bills.

However, I know that having some money set aside would be more sensible, and that my e-fund should not entire consist of credit - this is the first time I've ever not had savings since I was 16.

If I was REALLY disciplined (and even taking into account Christmas, which I spend a shameful amount on), I could have £1,200 in savings by the beginning of January and still owe £1,200 on my overdraft, or have a completely 'clean slate' (no debt (except student loan) or savings) but I couldn't do both. I think that perhaps it's more sensible to build up the savings first, but I really do want to get the bank account into credit permanently - I hate the debt.

I just don't know what I should do first. I know that it's a matter of a few months either way but I'm finding it so hard to be patient after wanting to pay off this debt for so long! I know that other people have bigger debts and have been waiting longer, but I just don't know how they do it!

Anyway, my goal for November is to stick to the budget and save that £400, whether I decide to pay off it the overdraft or put it the saving account. Wish me luck!


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 Post subject: Re: UK graduate - just starting out getting fit financially
PostPosted: Tue Oct 25, 2011 1:28 am 

Joined: Tue Jan 26, 2010 10:08 am
Posts: 113
scottishgrad wrote:
Well I'm nearly a month into that permanent job :D (and it's a job I love, too, with the charity I'd been volunteering for).


Congrats! :)

Given
Quote:
I have a very tight support group of family and we (my boyfriend earns a little more than me) could (just) make it on one of our incomes. It would be miserable and very, very tight, and we would be eating rice and sitting at home every night. But we would be able to pay the rent and important bills.

and
Quote:
I think that perhaps it's more sensible to build up the savings first, but I really do want to get the bank account into credit permanently - I hate the debt.


I'd vote for knocking out the overdraft. If the difference is just a few months, and you've got the permanent job (and could survive without it, worst case scenario), go for the win of getting rid of the debt. It makes more financial "sense" to build up a savings cushion, but with a 0% overdraft you're sort of doing that anyway by paying it off. And if, come February, you start throwing £250 (or £400, whatever's available) into savings, that will build up quite quickly. :)


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 Post subject: Re: UK graduate - just starting out getting fit financially
PostPosted: Sat Jul 28, 2012 3:20 pm 

Joined: Sun Jul 24, 2011 10:29 am
Posts: 3
Well, I haven't used these forums for a LONG time :$ but it just popped into my head to come back on because I've been thinking about money so much recently!

Here's an update on my situation:

INCOME
Monthly salary after tax etc: £1,215

OUTGOINGS
Rent and household bills: £250 my half
Groceries: £150 we still each put £150 into the account for this monthly but over the last 3 months I've been taking part in a grocery spending challenge on another forum and we only spend £230 in total now, which might reduce further - the excess money building up in the account will be used towards our holidays or date night.

iPhone bill: £35 plus any extra off plan spending, normally less than £5 a month (I cancelled my insurance once I got a bit of a savings cushion, so a £12 a month saving there)
Gym membership: £37 (used all the time)
Public transport pass: £82
Contact lens delivery: £10
Charity: £10
Spending money: £350 (This includes hobbies e.g. books, wall climbing, knitting, garden supplies, clothes & make up, entertainment & socialising, haircuts, dentist appointments/glasses, my half of household stuff, gifts - any kind of spending really that's not fixed).

Total outgoings: £924
Total left over every month: £291

DEBT
Student loan: £10,500 income contingent repayments, interest rate is the rate of inflation so no sense in paying off early
I do have two credit cards, one a rewards card, that are always paid off in full.

SAVINGS
£1,000: ISA (instant access, well it takes up to 3 days to get the money)
£968: Savings account linked to current account

I'm going on holiday with OH in two months, flights are already paid for, there is around £400 spare in our joint account to be split equally and the rest of my half will be paid from savings. Plan that this will be around £500 or so. After that, I will take around £500 from savings to pay for Christmas.

I'm pleased with how things are going, but I do get a bit discouraged to think that I'm doing better at saving than many people I know, and yet it will still be literally years and years until me and OH have enough money to buy someplace. Never mind paying for a wedding or the fact that we want kids in the next few years!

It doesn't help that OH, while not in debt, has never been the type to put money aside - he does live within his means but paycheque to paycheque. Now his income has been cut a little (less overtime available) and he is struggling a bit with being skint every month and dipping into his overdraft at the end of the month. He earns a bit more than me (£100-250 a month though it does vary a lot) and it's a bit of a reversal for us that I'm feeling flush and he's skint as I was a student then unemployed then only working part time then paying off debt until January when I suddenly had money to put aside lol! I know how miserable it is not having any cash, yet his fixed outgoings aren't very high and I can't help but think that if he learned to budget and tracked his expenditure he'd see lots of ways to save - he is in the same lucky position as me of having a very low rent etc. For instance he smokes 20 a day and stopping would obviously save him £200 a month, he has switched to rolling tobacco this month which is cheaper, but still expensive! (He does want to stop and has tried a couple of times with no success).

He is lovely and generous and a fantastic boyfriend, but personal finance is just not an interest of his (he thinks I'm a bit TOO keen on saving money lol), and as long as he's not in debt, he doesn't see the problem. Just not sure what I can do to help, as I'm happy to treat him to dinner etc when he's feeling poor, but neither of us would want me to just give him money every month, especially as I'm the lower earner! Any advice gratefully received lol.


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 Post subject: Re: UK graduate - just starting out getting fit financially
PostPosted: Mon Jul 30, 2012 10:14 am 
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Joined: Thu May 17, 2012 10:05 am
Posts: 884
scottishgrad wrote:
He is lovely and generous and a fantastic boyfriend, but personal finance is just not an interest of his (he thinks I'm a bit TOO keen on saving money lol), and as long as he's not in debt, he doesn't see the problem.

Any advice gratefully received lol.


Welcome to the forums scottishgrad! The good news is you are not alone! There are many people on this site that have experienced success and have great advice to share. You are doing the right thing by seeking advice. Here’s a little game plan to get you started. Questions I believe would be helpful are labeled by letters A-L and are in bold.


1. Make the Resolution: Spend less than you make. This is a tough one. Spending more money than you earn is common practice in the U.S., and increasingly in other countries around the world.

Learn to just say “No.” You must learn to say no to yourself, your spouse/partner, and your children. This is called delayed gratification. It is essential to getting out of debt. A) Are you ready to make the resolution?

“Live like no one else [today] so you can live like no one else [in the future debt free].” – Dave Ramsey

2. Educate Yourself: The local library is a great resource. If you eventually want to purchase these Amazon.com or Half Priced Books is a good place to look. We used DR's methods and went through Financial Peace University twice (first the audio CD and then the Dvd series) and I can tell you it works. We have been debt free since the summer of 2011! B) Have you considered taking DR’s Financial Peace University course? The new FPU course is only 9 weeks (1.5 hour sessions) long now instead of 13 weeks (2 hours sessions).

I. Some good personal finance books:

• The Richest Man in Babylon By George Samuel Clason
• The Total Money Makeover By Dave Ramsey
• The Millionaire Next Door By Stanley and Danko


II. Some good Leadership Books:

• The One Minute Manager by Ken Blanchard, and Spencer Johnson, M.D.
• Who Moved My Cheese by Spencer Johnson, M.D.

3. Motivate Yourself: Getting out of debt takes commitment, energy, and intensity. This will require sacrifices. Set clear and achievable goals on one page or less. (I’d recommend the “The One Minute Manager” by Kenneth H. Blanchard and Spencer Johnson.) Put these goals on the fridge or as you walk out the door so you see them every day. Starting a financial journal on the GRS forum is a great idea. Reward yourself with little treats as you accomplish your goals. Normal = spend like there is no tomorrow. Being different or even “weird” by seeking to become debt free is a good thing. C) How are you and/or your spouse/partner motivated?

4. Organize Yourself: Create a balance sheet. This helped us a lot when looking seriously at getting out of debt. D) What is your total debt? How much is the interest rate associated with each debt? What is the total pay off? What is your total Net Worth? How are you tracking your expenses (Excel Spreadsheet? Mint.com?)

Assets(stuff you own) – Liabilities(debts) = Net Worth

5. Choose: D) How are you going to get out of debt? – Lowest balance (Debt snowball) or highest interest.

If the debt snowball…

1. Create a list of all of your debts: credit cards, car loans, student loans, mortgages, etc…
2. Next to each one write down the total balance owed.
3. Re-order these from smallest to largest debts (use Excel to make this simpler.)
4. Pay the minimum payment on all of the debts – except the smallest one.
5. Put every extra dollar you can find towards paying off that smallest debt.
6. Celebrate like crazy when you get that first debt paid off.
7. Take the amount you were paying towards the first debt and put towards the next smallest debt. Do this until this one is paid off.
8. Celebrate again!
9. Continue this process until each one is paid off.

6. Cut Expenses: Sell something. Create a budget. Cut. Cut. Cut. F) What are some ways you can cut expenses out of your budget? See this thread. Once you’ve created your budget evaluate it periodically but most importantly - Stick to it!

Expenses > Income = Bad & Expenses < Income = Good

7. Spouses/Partners get on Same Page: While every couple is different, you could consider reading the same materials, talking openly about your feelings, and sharing like goals. When you share goals, you are usually more likely to take the necessary steps to accomplish your goals. If you or your spouse/partner are not on the same page, the process will be a lot more difficult. Communication is the key. Determine not to live life in the bondage of debt. Credit Cards are not the answer. G) Are you and your spouse/partner on the same page? What would it take to get on the same page?

8. Get an Accountability Partner/Coach: When you are getting out of debt, you want to be influenced by people who support your decision. Not everyone does. This can even include family. Hang out with friends who are frugal. Befriend people who enjoy movies at home instead of in the theater. H) Who do you know would be a good role model for you in getting out of debt and holding you accountable to your goals?

9. Save up for an Emergency Fund: $300 (if you make less than $15,000 a year), $500 (if you make more than $15,000 and less than $24,000 a year), or $1000 (if you make more than than $24,001 a year) respectively. Do this quickly hopefully in less than 2-3 months. Emergencies can and always will happen – car repairs, home repairs, hospital bills, etc. It is better to be prepared for when the emergencies happen. I’d say a good goal would be an E-fund with 3-6 months of household expenses. We have 9 savings accounts we use to save for emergencies and expenses we know will happen – car repairs, new car, new computer, medical bills, baby related, purchases, vacation, etc. We don’t even touch our E-fund anymore for most emergencies. I) What system do you think would work best for you?

10. Increase Your Income: Seeking a raise is a good place to start. Getting a second job part-time is a good idea too. If a couple perhaps the spouse/partner who isn’t the main bread winner could get a part-time job making $1000-2000 per month. Or what about having a yard sale? Hopefully this extra income will lead to you paying off your debts sooner. Your income is your greatest asset. Time to stop giving other people portions of it through interest and fees! J) What ways could you earn extra income?

11. Set Financial Goals: Goals are the fuel that propel you through the slow days of debt repayment. Hey, the process will get hard and it will seem to drag on at points. You’ll want to quit and give up. You’ll start to think that your old way of living wasn’t so bad after all. These are the days you need to look at your goals and remind yourself of why you are making the decisions you are making. Make sure your goals are SMART – Specific, Measurable, Attainable, Realistic, Time specific. K) What goals do you want to establish for 2012? What are your long term goals over the next 5-10 years?

12. Stop Making Excuses: Sometimes, not always, we make excuses. I would get out of debt but …

Right now you have a perfect opportunity to change your life and create a new financial identity. Accomplishing goals always feels great. Imagine how you would feel if you paid off all your debt and didn’t owe any money to anyone! You are on the right road to change your family tree! L) Are you ready to make the changes necessary to get out of debt?


Hopefully this was helpful. ;)

Your thoughts?

_________________
~ Eagle


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