Following on from Part 1, we’ve had a approximately six months with our new monthly budgeting strategy and the release of stress has been fantastic.
While each normal month is now taken care of, abnormal months still caused us a bit of a problem. Being dumped with a massive bill for a couple of new tyres in a month or unexpected events like Christmas would wipe out any spare cash and cause problems for the month.
So, we need a longer term strategy to complement our monthly plan.
First thing we had to come to terms with, and I know this sounds pretty obvious, is that most of the unexpected outgoings aren’t unexpected at all. We know full well when there are going to be bills for things like MOTs, car tax, Christmas, so it makes sense to prepare for them so when they do hit it’s as painless as those weekly food bills.
So a couple of weeks ago, we sat down with a year calendar and put into each month the big expenses we know about; May Dave’s car tax £160, August Holiday £400, etc. We then split each big payment by the number of months between then and now.
My car tax in May: £160
Number of months between then and now: 5
Amount to save each month: £32
So if I save the relatively small amount of £32 each month, that potentially monthly money devastating payment of £160 will be eliminated.
We did this for all of the large payments and then double checked each month to make sure that we could afford the saving amounts. It all looked good.
Having the knowledge that all of these things are accounted for and under control is another massive weight off.
Of course, there is the slight pain of starting something like this. Normally I will be able to split that car tax payment over 12 months, but you’ve got to start somewhere, so it’s going to be a lot for the next 5 months, but after that will only be just over £13 a month.
Once we’ve got that plan settled in, it’ll be time to start thinking about such things as reducing overdrafts, saving, investing. But one step at a time eh?