Fresh Starts, Frugality & Savings.
First of all, I would like to thank anyone who read my rather-rant like article that I used to launch my writing on Medium (Here). I honestly was not expecting 50 claps, and I am grateful.
In the month since that article, my situation has improved in the form of starting a new job for a Finance Firm, and a chance to restart my finances.
One of the first decisions I have made is to have my new job pay into my ‘secondary’ account, one I initially set up to monitor grocery/consumable spending. I’ve now made the decision to switch over as this secondary account is better at tracking spending, creating savings goals with protections before you withdraw it for ‘reckless’ spending, and is easier to manage through an App (it’s an entirely electronic bank) than the High Street Bank Account I have had for 6 years.
Secondly, creating a rather hyper-defined Budget, breaking down my earnings through this new position into every time period possible, from the Year down to the hour.
This budget is based on my current situation sharing a 2-bedroom flat in downtown Edinburgh, while I pay more due to having the larger room and pay the Council Tax as my flatmate is a student and brings in less through their work. Heat & Wifi are split 50–50, and we tend to grocery shop & Cook together (while maintaining a reduced meat diet).
My current position is a 6 month temporary-to-permanent role, 35 hours a week, M-F, with general flexible hours 9ish–5ish. It is transitioning back into an office, but WFH is offered, and the crux of the position is that it is not a telephony/call center position. My heart goes out to millions of call center workers, but I have done my time and really would rather not work in one after 4 years within various sorts of roles, especially after working Bereavements for a Bank throughout 2020.
As it stands, the current budget looks promising, as even on a relatively modest income, my attempts at frugality should create a 43% Savings Ratio.
I know it might look unrealistic that I haven’t budgeted money for Takeaways, Coffees, or Drinks. Admittedly, part of this is shaped in still being in ‘Lockdown’ Mode after 1 year of isolation, and another is that I am becoming a decent cook, take my coffee black, and only occasionally do my flatmate and I get a takeaway. After sinking into a deep alcohol-induced depression in the summer of 2020, I have significantly reduced my alcohol consumption, and even now am considering taking it out of the picture entirely.
Thirdly, prioritizing Savings over Debt Servicing.
It seems opinion is mixed when it comes to the ideas put forth by Dave Ramsey. However, the fact that their first Baby Step is to build up a emergency fund is something that seems to make sense. Historically, I have ended up channeling almost all my leftover money after bills to paying off debt, only for emergencies/unexpected expenses to crop up, resulting at me being back in the red. After the past month where I whittled down my emergency fund, I’d be looking to rebuild it rather than rely on my overdraft as my ‘emergency fund’.
Once I have some sufficient build up in the emergency fund (after 3–4 months worth ~1200–1600£), I plan to flip the above budget and put 100£ a month into Savings, while channelling 465£ into Debt Servicing.
I have sectioned 52£/Month away for ‘Investments’. This is a weekly collection of 12£ every Monday into a Pension, LISA (Lifetime fund in the UK for buying a house or a retirement fund), and Stocks & Shares account, at least to reassure myself that i am able to place something into long term-goals.
My first Payday is this Friday (14/May) and I am looking forward to being able to start battling some Debt, and begin to build a solid savings habit.
I realize it is going to be a bit of a climb out. However, once any debts are finished, I have my eyes on a 6/100/40 plan:
6 Accounts. 100£/month/Account. 40 Years (until i am 67–68 and eligible for a State Pension, assuming it still exists by 2061).
- 100£/Month into Easy Access/buffering up Emergency Fund.
- 100£/Month into a 45 day Notice Account (New Gadgets, Clothes, Holidays).
- 100£/Month into a 95 day Notice Account (University, other large purchases).
- 100£/Month into a Lifetime ISA for either a House Deposit or to be used at 60 as a Pension. This would be topped up by the Government to form a Gross 125£.
- 100£/Month into Stocks & Shares Account.
- 100£/Month into a Private Retirement/Pension Fund. Similarly topped up by the Government to a Gross 125£.
It may not be FIRE, but with a 40–44% Savings Ratio, even at a modest income of 20,000£ I am attempting to challenge the idea that no one can save anymore.
Now here is the tough part. Putting this in practice and seeing how the next few weeks/months/years go.
Once again, thank you for reading, and I wish you all luck on your own respective Finance Journeys. Stay tuned as I see how putting this in practice with my first few paychecks goes.
