Conversations Around My Money: How I Tackled My Personal Finances


Recently I heard a piece of advice which has shifted the way I view my finances.  And it's so simple.

I honestly feel a little stupid that I've never considered it this way before.

My first step on the road to money management was to sit down and work out my income vs outgoings for the month.  And I was surprised by how little I was left with by the time I'd deducted "non-negotiables" (rent, car payments etc) and any debts, plus factored in the purchasing of general household purchases and putting petrol in my car.

It was an eye opening experience and it's no wonder I'd been running out of money with my previous mindset of "buy now, worry later".

I decided to use the piggy banking method as a way to keep funds separate and manage my money better.  This is where you have several bank accounts and transfer money into each to cover a specific expense.  For the time being I'm keeping mine simple and have just three accounts: a main one with my bills and direct debits, a savings account and a newly-opened current account into which I've been transferring a certain amount each month for those general household spends plus any regularly occurring social events.  I'm finding my feet with this one at the moment, so for the time being have transferred just under 20% of my monthly income and will adjust this in future if necessary.

Truthfully the idea of a zero sum budget scares me so I'm easing myself in gently.  I don't given every pound in my bank account a destination, but do budgeted for all foreseeable outgoings and am trying to steer clear of the excess in my main bills account as much as possible.

At the end of the month I've been transferring whatever's left the two accounts across to my savings account.  At the moment I have a specific savings goal in mind (a trip to New York) but once that's out of the way I want to leave any excess in my household account as a buffer for the following month, with a view to eventually transferring that as well if it reaches a substantial amount.

So, to summarise my tips if you're just starting out on a savings journey:

1.  Be realistic about the money you have available as disposable income each month.  Write it down.  Being unaware of what's happening in your bank account is a no no.

2.  Assign every pound a purpose.  Until now I'd half-heartedly committed to saving "something" each month, only to run out of money and be left with nothing to save.  Now, with everything divided up, I feel much more confident I'll be able to put savings aside.

3.  Find a system that works.  So far piggy banking is doing the trick and I can't believe I didn't try it sooner!

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