Balancing my budget is a major part of my Anyway Project, an attempt to live a more sustainable, more meaningful life. It’s certainly not the most exciting part of the project but it’s essential as an enabling requirement. Without finding a way to live on less money some of my other aspirations cannot be considered. Having a comfortable home and a productive garden both require some input of money but more importantly they require me to have more time. Until recently I have been very short of time; work absorbed an inordinately large amount of time and energy. Now, however, I have an extra day a week for doing non-work stuff.
When times were especially hard at work, eighteen months or so ago, I (and the rest of the staff) was paid as if I were working a four day week. It kept the company viable. Some time ago we finally made it back to full salary and I found that I had plenty of money left at the end of the month. I talked to my boss and we agreed that I could go back to being paid for four days and actually only work four days. What a fab idea! So that’s what I’m doing and I’m loving the extra day each week.
One of the things I’m using my extra time for is to travel up to Ian’s once a month. Travelling off peak means I can go by train for around a third of full price. Ian reckons a round trip to see me costs around £120 with recent petrol prices. At around £30 for me there and back by train it not only saves him a lot of money, it saves a substantial amount of carbon. The extra time also means I can see more of my sister, Sue, whose work pattern means she has some Fridays and Mondays free too. And I’ve got time to do housework, cook and garden. It’s all good!
The only slight problem is the budgeting. Over the last two months I’ve been pretty slack about keeping my spending under control. In January I spent 25% more than I had budgeted for. Oops! It’s not the end of the world though, I was paid at my full time rate at the end of December so there was some slack available. There won’t be next month.
The budgeting method I use is from Zen Habits. It’s terribly simple and based on my income. I split my income up as follows; 60% for living expenses. This includes utilities, food, clothes, contributions to kids university expenses, insurance, charitable donations etc. As much as possible of this is paid out automatically on monthly standing orders or direct debits. When I first took my pay cut I went through all my direct payments. I took out about a third of my charitable donations, mostly those that had been ‘sold’ to me by charming people, and retained the most important ones. Practical Action and Womankind are among the charities I kept on. I got rid of my contact lenses, cut my insurance payments down, got a water meter slashing my water bills by two thirds and turned my thermostat even further down. I also started buying my bulk food from Lembas, saving a substantial amount of money on Waitrose prices.
So, 60% for living expenses, 10% for short term savings, 10% for long term savings, 10% towards a pension and 10% for fun stuff. That last means that I don’t have to feel guilt for going to the pictures, eating out or buying a couple of bottles of wine. The short-term savings are supposed to be used. They are the way of dealing with the large payments that are scattered through the year including Christmas, birthdays, household maintenance costs and large purchases. Currently I am taking out more from my short-term savings than I am putting in. This is, of course, unsustainable. It should come to an end when my short-term savings reserves are exhausted or, preferably, before.
My long-term savings and some of the 10% for pension goes into my ISA, which is paying a paltry amount of interest right now. I am not contributing to a regular pension at the moment and haven’t been since taking the initial pay cut. I’m not sure quite what to do about this. I suspect that by the time I am able to retire there won’t be a pension scheme paying out anything I could live on no matter how much I paid in now. This is something to think about. In the meantime the money is as safe in a building society as anywhere.
If this system is used in its simplest form my salary goes into my current account, all regular payments are made automatically, including those into savings accounts and I should withdraw my fun money and living expenses money, and keep them in separate envelopes. I should never use my debit card and I should stop spending when I get to the end of the cash. This is a very effective way to cut down on spending. Actually handing over notes and coins and seeing the dwindling amount keeps you focussed. I think that is what I will do next month, keeping a small amount in the bank to pay for train tickets and maybe one book a month from Amazon.
What I have done up to now is track what I have spent in a tiny multicoloured excel spreadsheet, a new one for each month. The most technical this gets is a little box that tells me what I have left which is fine as long as I look at that box before spending. Which, of course, I don’t usually. I did a quick breakdown on what I have spent my discretionary money (fun & non-automatic living expenses). I found it a really useful exercise. Remember that I overspent by 25% for January. This is how the total spend broke down:
18% eating out fun
18% required travel
16% clothes (in the sales)
9% household (a new sheet, towels etc in the sales)
7% wood for my little stove
2% entertainment (tickets for Sally & me to see George Monbiot debate)
2% discretionary travel (buses in Sheffield where I could walk)
2% discretionary food (food I buy when travelling due to lack of organisation)
1% health (one prescription & hand cleaner for travel)
OK, January is when I do my bulk garden order and that could have come out of short-term savings but there’s already some wool (from the sales), train fares to get Sally to university interviews and Sally’s hotel at Eastercon (£216!!!) in there. And I spent lots more on clothes and household stuff because in the sales you can get twice as much for the same money. Also, the wood purchase, whilst not a one-off will not be a regular – the stove is very much a back-up and very occasional cosy evenings extravagance. Books are down to almost nothing due to joining the library.
What is quite interesting (to me) is that Eating Out Fun and Required Travel (train tickets) are by far the biggest portion of the money I spend. The other rather scary thing is that I pay somewhat less than half of the spend for Ian and my joint meals out. To some extent the eating out is because he and I have such different preferences. He’d rather eat meat and a salad and I’d rather eat vegetarian with a preference to starch. If necessary I’m sure we could come up with another way of dealing with this at home.
And that is the comforting conclusion I draw from this analysis. I could live comfortably on even less money if the need arose. It would require more thought and organisation but it would be quite possible. If the economy continues downward I could still work a four-day week and get paid for three, but only just. And below a certain level of income comfort just disappears.