My first month with EveryDollar

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I’ve written before that we follow a ‘dual account budgeting‘ approach when it comes to personal finance. This simply means running two current accounts in parallel.

One account is for all regular payments (e.g. our household standing orders and direct debits). The other is for all other “discretionary spending” for other items in the budget that will vary, so which require a higher degree of control.

Simplify your finances

By running two accounts, managing our monthly budget becomes much simpler. The first account is topped up on pay day, then it pretty much runs itself.

This leaves only the second account to manage whose spending categories are reduced to a small sub-set of headings, as follows:

  • Food/groceries
  • Transportation
  • Mobile phones (I’m on a pay-and-go arrangement, not a contract)
  • Lifestyle (costs associated with hobbies, pet care, hairdressing, clothing etc.)

So far, I’ve normally used a spreadsheet to manage our finances. However, as a regular listener to Dave Ramsey’s podcast, I was curious as to whether or not the EveryDollar app would work for us.

What’s different about EveryDollar?

EveryDollar is designed around a zero-based budget. That is, every month you decide (in advance) how you’re going to allocate money to each of your particular spending categories.

The name stems from Dave Ramsey’s approach to budgeting: if you give every dollar a name and tell your cash where to go, you’ll win with money.

In my case, I need an app called ‘EveryPound’ but that doesn’t quite have the same ring to it! So, EveryDollar it is!

Creating your budget

When creating your budget, the idea is that you input your income, then allocate your expenditure by category so that the latter totals the former. It’s a bit like a contemporary take on double-entry book keeping: both income and expenditure have to balance.

This allows you to:

  • Pay down debt
  • Allocate money for savings, including a sinking fund
  • Plan for upcoming monthly spending
  • Stick to your budget

I was already creating a zero-based budget with my own spreadsheet, but the EveryDollar app has a simple and visually-appealing user interface, so I decided to run both systems in parallel throughout March/April to see which one I preferred.

What’s a sinking fund?

One option you can select when setting your budget in the app is to establish a sinking fund. This is essentially a mini savings “pot”  for things you know you’ll be paying for at some point in the year. It’s like a virtual piggy bank.

In our case, that’s £125 per month towards the annual service for our family car (plus anything else car-related)/, as well as a fund for Christmas. I trust that £1500 in total will be more than enough for both vehicle and Santa, but we’ll see!

By establishing a sinking fund, you don’t have to raid your emergency fund if, for example, you suddenly need a complete new set of tyres. You can also budget throughout the year for bills such as a your annual travel insurance policy or car insurance (cheaper than paying monthly).

With EveryDollar, I wasn’t sure if I needed to account for the £125 as a transaction (in which case, would this be “income” or an “expense”?). So, I experimented and found that the app just accounted for the £125 going into the ‘fund’; I didn’t have to record it as a transaction at all.

A slice of the cake

Another feature of EveryDollar is that it shows you what proportion of the whole a particular budget heading represents.

So, if you’re nerdy like me and you want to check what percentage of your total budget you’re devoting to a particular category, you can check. The app tells you what proportion of the ‘cake’ you’ve planned to spend, as well as how much you have remaining. That’s esimportant if you’re paying down debt and are intentionally on a tight budget.

By splitting my expenditure across two accounts, it makes it a little more tricky to work out what I’m spending as a proportion of the whole on each category.

I had a mini moment of panic when I saw the percentage apportioned to food and groceries, but when I did the maths (across the two accounts), I was relieved to see that what I’d allocated was less than 10% of the whole.

If you’re curious what Ramsey recommends, you can find a guide on the EveryDollar website.

Linking up your accounts

One thing I can’t do is link up the EveryDollar app’ to our bank account. To do this, you need to pay for EveryDollarPlus (and I don’t believe this would work across the Pond).

Instead, I track my spending by recording a transaction every time one hits my account. This way, I can keep a close eye on that particular category and check what I’ve got left.

A new month

As the new month rolled around, you’d expect me to have done the budget for April. However, I’m waiting until pay day (the third week of the month) to prepare my budget for April/May.

I know that some EveryDollar users are comfortable running their budget to align with the calendar month, but my ‘fiscal month’ is 24th to 23rd. This means my monthly headings are going to lag behind; until 24 April, we’ll still be in “March”. Maybe that’s a good thing. It still feels like winter!

Setting an intention

Of course, one of the aims of the app is modify users’ spending habits. Right now, the jury’s out. So, I’m going to carry on with my comparison of app versus spreadsheet. Let’s see, as the rest of April unfolds.

Do you have a favourite way of managing your budget? Perhaps you use an app like EveryDollar or have tried my dual account budgeting approach. Let me know by replying to the post, below!


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An update on going car free

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I recently wrote about my first few days of being car-free, which coincided with somewhat challenging weather conditions and me starting a new job.

Things have settled down a little, so I thought it would be fun to update you on what going car-free has meant to me.

Patience is a virtue

‘Hurry up and wait’ is the order of the day when ‘public’ is your main mode of transport. Sometimes, at the end of a day, you turn up at the interchange, jump on a bus and are home within half an hour. Other days, you wait (and wait…and wait).

You have to learn to be laid-back about punctuality or be prepared set off very early if you’re keen to arrive at your destination on time.

Sometimes, the bus doesn’t turn up at all. “Yes,” says the cheerily responsive person representing the bus company on Twitter: “I can see the bus isn’t operating but I don’t know why…” Patience is definitely a virtue.

Every cloud….

Every cloud has a silver lining. If you have to wait, then it’s a chance to read (even if you’re standing at a bus stop in the snow).

Reading on the bus is an absolute joy. So far, I’ve read a whole novel, courtesy of Warwickshire Libraries’ cleverly-named “Libby” app and am almost through my second. Mind you, it’s important to be able to see out of the window in order not to become travel sick. You don’t want to arrive at your destination feeling a bit queasy.

Book recommendations

Bus-bound book recommendations, in case you’re interested, are:

Alex Hourston: Love after Love (a writer who is new to me; I loved her terrific book but was sad about the ending!)

Lian Moriarty: Truly, Madly, Guilty (utterly magnificent story-telling and so brilliantly crafted – a must read!)

I’m also reading:

Virginia Baily: Early One Morning (a WI reading group book – our novel for the month of April).

Podcasts?

I thought I might also enjoy podcasts while travelling (and it’s clear that people do), but the traffic noise would mean having to turn up the volume higher than would be safe for my ears (and I value my hearing). So, I leave the podcasts for other moment. But I must tell you that I have laughed out load to Fi Glover and Jane Garvey’s Fortunately podcast, so do check it out (Episode 42 is a good place to start).

A trip down memory lane

Travelling by bus takes me back in time. I remember going by double-decker down to the market to buy eggs for my mum when I couldn’t have been more than about 11 years old. The fare (in those days) was, “Two, please!” That was 2 pence!!!

With or without eggs (possibly a hazard!), riding upstairs on a double-decker is as fun as it always was. There’s that sense of perilously careering towards obstacles as the bus hurtles along, the branches from overhanging trees smacking against the sides of the vehicle, as it continues on its journey.

A birds eye view

Just as you take in more of your surroundings when you cycle, so you get a different perspective on the world when you take the bus (especially on the upper deck). You can peek into building plots and see the development take shape, whilst also enjoying a birds eye view of walled gardens that would otherwise be hidden from view.

Baggage and footwear

A word about baggage. Back-packs work where handbags don’t, especially when you’re walking 0.8 miles each way between home and bus stop, carrying a combination of lunch, laptop or heels). Talking of shoes, I soon invested in a pair of Nike trainers. They’re light and super comfy and also double up as jogging shoes when I need to trot between buildings on the university campus where I work. Walking to and from the bus must be making me fitter!

The downside?

This all sounds highly convivial. But, is there a downside?

It’s true that there have been one or two occasions when our family car hasn’t been available when I needed it. Quite soon after I gave up my car, my daughter and I both had dental appointments in different places, which required some carefully timed logistics to make it all work. In this case, I pre-booked a taxi. Whilst this was a little expensive, another bus-bound friend and colleague reminded me that the times when you’ll actually need to get a taxi under those circumstances are few and far between. She was right. We’ve only had to do this once.

What next?

Now that British Summertime is upon us and we’ve put the clocks forward by an hour, I’ll be able to cycle to work again, especially when the weather is warmer. So, I’ll be able to combine my public transport adventures with a little energetic pedal power.

And do I miss the car? Not a bit.


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The shopping ban vs written budget

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I’ve recently started reading Cait Flanders’ The Year of Less. In this book (her debut), Cait documents (with a real openness and honesty) what was happening in her life during a 12 month period when she decided to go ‘cold turkey’ on her spending and instigate a year-long shopping ban.

Cait describes how she had documented the ‘year of less’ on her blog, inspiring others to do a shopping ban of their own.

The Approved Shopping List

In case you’re curious, Cait decided to change her relationship with spending by sticking to a specific number of self-imposed rules. The items on her Approved Shopping List were carefully considered: she worked out what would be coming up during the period of her shopping ban and planned accordingly.

To give you some examples, takeout coffees were firmly off the list, but replacement toiletries and cosmetics were OK, providing they weren’t “fun items” such as nail polish. Travel was definitely on the list, but clothes were not.

This got me thinking about the difference between getting on a written budget versus instigating a shopping ban. Were they polar opposites, or could one approach benefit the other?

Getting on a written budget

If you’ve been reading my blog for a little while, you’ll know that I have previously cited the work of Dave Ramsey. One of the key tenets of Ramsey’s philosophy is that, if you’re going to be successful with money, you have to get on a written budget.

Ramsey’s budgeting app, ‘EveryDollar’ (not available in the UK), is so named because the idea is that you literally tell every dollar where to go.

My dual account spreadsheet serves the same purpose. With two accounts rather than one, we run all of our regular bills and expenses (e.g. utility bills) off the first account. This leaves only the second account to manage in terms of discretionary spending on items including food, groceries, fuel and so on.

Why a written budget is so useful

A written budget is essential. It means you plan in advance of your spending, rather than worrying about where your cash has gone when there is ‘too much month at the end of the money’.

If your finances are joint ones, by sitting down each month and doing a written plan, you also balance any ‘go go’ (spending) tendencies against any ‘no no’ (saving) preferences within your relationship.

The benefits of a shopping ban

A complete shopping ban also has a number of benefits, especially if you’re someone who needs to take an ‘all or nothing’ approach.

Writer Gretchen Rubin famously abstains from eating carbohydrates; if she doesn’t eat carbs, she doesn’t have to think about them. A little bit of something in moderation isn’t her style.

The same goes for someone who can’t go shopping without returning home laden with bags of merchandise they hadn’t planned to buy. So, the ‘all or nothing’ approach might be beneficial.

By announcing your intention, you can also get accountability for your goals: your supporters will spur you on and help keep you on track.

‘No spend’ drawbacks

Cait’s experience made me realise that initiating a shopping ban might also bring some drawbacks.

For example, so-called well-meaning ‘friends’ would try and tempt her to buy something Cait didn’t need, or which wasn’t on The Approved List. They reasoned that ‘she deserved it’ or that a little retail therapy was no bad thing. In fact, this was tantamount to offering a reformed smoker a cigarette, a dieter a wedge of chocolate fudge cake, or an alcoholic ‘just one’ drink. Happily for her, a handful of true friends were on hand to help keep Cait on track.

Another potential drawback of a shopping ban is that you also have to deal with your own triggers. That is, if you’re working to achieve specific financial goals, avoiding putting yourself in situations where you might blow your budget is essential. For an abstainer, it has to be all or nothing.

As Cait writes, “The toughest part… was having to confront my triggers and change my reaction to them. It always felt like the minute I forgot about the shopping ban was the same minute I felt like shopping again.”

Why a written budget provides some flexibility

If you’re like me, you might prefer having some flexibility each month. That said, Cait certainly didn’t set out to veto all spending forever; it was, after all, an experiment.

What helps me is that I’m now really intentional in what I buy; getting on a written budget also avoids any feelings of self-deprivation. If we need something (in any category), we make provision on the spreadsheet for it. There’s no ‘forget it, I’m going to buy whatever I want’ and the extremes of a shopping spree or spending ban are avoided.

The middle ground

Where the ‘no spend’ philosophy might help is in cutting out expenditure that you know doesn’t add value to your life and which may impact negatively on your overall finances.

For example, if you regularly buy lunch out (perhaps at a cafe or by picking up a take-out meal), the cost of this soon adds up. Deciding to intentionally exclude things from your budget can help you achieve your financial goals. In a recent post, I discussed the idea that second-hand should become second nature; applying a ‘nothing new’ rule might be one approach to consider.

All or nothing?

I admire Cait Flanders’ forthright account. In applying her ‘no spend’ discipline, she not only learned a great about herself, but she lived on just a proportion of her income. This helped her not only to pay off debt but also to truly understand the important things in life.

Whichever route you choose, laying some ground rules (and getting accountability for your goals) will truly reap the benefits. And less is definitely more.


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Why buying second hand should be second nature

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For a number of years, my wardrobe has comprised around 50% secondhand clothing and 50% items that I have intentionally bought in the sale of brands I trust. Rarely do I buy clothing that is full price.

Since I follow the Project 333 approach, that’s roughly 16 items ‘new’ and 16 or so ‘second hand’ altogether. It’s more than enough and buying second hand is such a good thing to do.

Here’s why:

Second hand offers great value for money

Buying second hand a great way to buy what you need at a fraction of the cost of what the item would have cost new.

One of my more recent second hand purchases was a gently-worn and perfect-fitting brown suede skirt from Monsoon. It cost just £8. To go with that, I picked up a Mint Velvet cowl neck knit for just £1.66.

My most recent acquisition, which inspired this post, is a little black dress by Coast. I’ll wear this for a work-related ‘do’ in early March. It cost just £9.99 from eBay and I’m currently watching a co-ordinating pair of shoes whose starting price is £3.99. My whole outfit is likely to cost less than £15 overall. I had recently sold a number of dresses myself, so the direct cost of this purchase was far less than the actual sale price. Plus, I’m sticking to my principles of one in, one out.

Pre-loved is better for the environment

My heart sinks whenever I enter a store selling ‘fast fashion’. Like me, my teenage daughter’s on the lookout for value for money, but she’s far less likely to buy second hand. Whenever I enter one of these high street stores (which, mercifully, is seldom), I’m struck by the vast quantity of merchandise which, on closer inspection, often seems flimsy and of poor quality. We all know that the world has reached ‘peak clothes’ so it’s especially important to be intentional when we buy. What better way to signal that we care about the environment by doing so via what we wear? 

Gently worn supports great causes

We often moan that today’s high street consists mainly of coffee shops, estate agents, hairdressers and charity shops. Yet, we often fail to recognise the important contribution charity shops make to the causes they serve.

Writer and friend, Rae Ritchie,  is fashion ambassador to Myton Hospices Charity Shops. Not only do these shops offer great value for money, they’re supporting a much valued local cause.

To give you a sense of their importance, Rae explains: “Myton Hospices require £8.8 million per year to fund their vital end of life care at three hospices in Coventry and Warwickshire. Their 22 stores play an important role in raising that money.”

In terms of fashion finds, Rae tells me that Myton’s Coundon store currently has some Vivienne Westwood shoes. Her own recent buys have included a vintage leather handbag, some barely used yoga pants and a denim tunic that is being continually washed and worn!

Second hand is not second best

For kids (who grow so quickly you can almost see them sprouting upwards), second hand clothes are absolutely fabulous and definitely not second best.

When our daughter was tiny, we used to buy all her clothes from the NCT Nearly New Sale. As her mummy, I loved putting all the cute little outfits together, but never had to be overly anxious about anything she wore; nothing cost more than a couple of pounds.

Once you’re fully grown (and assuming you maintain a stable weight and size), it’s wonderful to be able to buy second hand clothing online, as you know what’s going to fit. Most brands are fairly reliable in terms of sizing, so you can bid and buy with relative confidence.

Where to buy

Fargo Village in Coventry is the perfect place to meet up with friends, enjoy a coffee and a browse in the Big Comfy Bookshop. While there, nip into Myton Fargo Village, Myton Hospice’s very cool and carefully curated charity shop (and you can get a sense of their one-off bargains by checking out their Instagram account).

Dress agencies are another way to find beautiful gently-worn clothes at great prices. I used to love Corina Corina in Warwick, as well as the aptly-named Savoir Faire in Kenilworth. Anyone remember them? Sadly, they’re no longer trading, but there are lots of alternatives, notably in Leamington Spa and Solihull.

Top tip: dress agencies only keep stock for a certain period of time. Once an item remains unsold after a number of weeks, it is either returned to its owner or passed to a local charity shop.

Here in the UK, eBay sales of second hand clothes are booming. I’ve both bought and sold over the years. Here’s where your knowledge of what fits really comes into its own; I know that a Phase Eight Size 10 is a pretty good bet if I’m buying a dress, for example.

Local Facebook groups are often great sources of second hand clothes, especially kids’ bundles. For buyers, there’s the nuisance factor of having to go and collect, but it’s free for both buyers and sellers, so there’s often a good deal to be had.

Let buying second hand become second nature

So, let buying second hand become second nature. You’ll be glad you did.


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More

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What drives us to yearn for ‘more’ or ‘better’ when we know that the more we consume, the more we deplete both our own, and the earth’s, precious resources?

As I have considered before, there are a variety of reasons we buy more than we actually need. They include:

  • Wanting to make a certain impression
  • Keeping up with the Joneses
  • Fear of missing out (especially on a ‘bargain’)
  • Having something ‘just in case’
  • Believing that ownership will make a real difference to our lives or even our happiness

The ownership myth

Ownership is a privilege but with it comes responsibility. You not only have to pay for the thing, but you have to maintain, upgrade, insure, clean and take care of it.

Worse, as Courtney Carver warns in her book, Soulful Simplicity, “If you use a credit card, the item might not even be yours. It’s possible that you are literally walking around in someone else’s shoes because you’re still paying them off…”

We own stuff for so many reasons. As Carver advises, “Once you acknowledge why you buy and what you think your stuff is doing for you, you will be more intentional about what comes into your home and life, and you will have more clarity about what needs to go.”

When can ‘more’ actually make a difference?

In her terrific book, America the Anxious: Why our Search for Happiness is Driving us Crazy and How to Find it for Real, Ruth Whippman cites a much-misquoted study about the relationship between happiness and income.

Whippman explains that the study, by Daniel Kahneman, is reported as showing that money makes no difference to happiness above an income of $75k per year.

In fact, Whippman explains that money over and above this level still makes a difference to a person’s overall satisfaction. And, of course, a person’s overall financial picture has a huge bearing on one’s life. As Whippman shrewdly observes, “Unsurprisingly, the further down the income scale you go, the more important it is.” That said, most of us in the western world already have more than enough.

Cultivating a sufficiency mindset

No matter what your income level, living on less than you earn brings enormous benefits. As Dave Ramsey repeats each time his radio show airs: “Live like no-one else so that, later, you can live (and give) like no-one else.”

Bestselling author of The Soul of Money, Lynne Twist, reminds us that when we let go of chasing what we don’t really need, it frees up energy to enable us to make a difference with what we already have. Having recently heard Twist in discussion with Oprah Winfrey in Supersoul Conversations, I am particularly struck by her philosophy that a sufficiency mindset is so much greater than a scarcity mindset. We already have enough. We are enough.

When more is more

When you adopt a minimalist lifestyle, it’s possible to pursue the things that really add value and that make a difference, not only to your own life but (hopefully) to the lives of others. Here, I come back to the ideas of connection and community, which I touched upon in my last post.

When it comes to connection and contribution, I’m about to embark upon a new adventure. Along with our Cockapoo, Ollie, I’ve recently been accepted as a volunteer with Pets as Therapy. This UK charity aims to foster connections with people through pet visits to establishments where pets are otherwise not available. I’m hoping to visit a local retirement or care home where the regular visit from me and my waggy-tailed chum might bring a ray of sunshine into someone’s day. Here’s when more is definitely more!

It’s not about stuff

No amount of ‘stuff’ is going to make a positive difference to our lives. Just as food should be about nourishing the body rather than feeding the emotions, so the stuff we own should serve a genuine need rather than fill a psychological hole.

As Whippman concludes in her book, “…if we focus on living a connected, fulfilling and meaningful life, then if we’re lucky, happiness might just hitch a ride.” And there’s no mention of stuff there.


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Why I’m performing plastic surgery on my credit card

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Many years ago, I applied for a credit card that offered 2% cash back on all purchases. That was pretty generous, so you can tell how long ago that was!

Every month, we would use the card for all of our discretionary spending (that is, anything we bought on a week-by-week basis such a food, fuel and so on). We’d pay off the card every month in full. Then, once or twice a year, we’d get a decent cheque in the post with our cash back amount.

As we always paid off the balance in full, the credit card company actually made little money from us directly.

When I’ve used a credit card

I still have a credit card but I don’t use it for everyday purchases. Instead, I have used it for that one-off, occasional or unusual purchase such as our daughter’s prom dress.

However, because of the ease with which one can use a credit card in this way, there’s always a nagging thought in the back of my mind. Every time I do this (even for a relatively modest single item of expenditure), I‘m borrowing against next month’s income.

In effect, I’m creating a shopping hangover.

A change of heart

So, I’ve had a change of heart. The fact of the matter is this. If we’re going to win with money in the long term, this is what I’m going to do.

I’m going to perform plastic surgery on my credit card. Yes, I’m going to cut it into little pieces and throw it away.

Now, some of you still use your credit card in the way I used to. You tell me that you find it easier to track your spending this way (although, for me, I can’t understand this).

For me, it’s crunch time and here’s why.

What the research shows

Research shows that credit cards are ‘friction free.’ That is, handing over a card is less painful psychologically than handing over actual cash. In an article for Psychology Today, Scott Rick explains that people tend to spend more when they use a card than they do when handing over actual cash: “Experimental research….suggests that credit cards can stimulate overspending: People are often willing to pay more for the same product when using credit than when using cash.”

Indeed, Rick cites a range of psychological factors, which compel consumers to use a card over cash.

Even though I don’t put a lot on my card, I know that when I previously experimented by cutting up my card, I definitely spent less money overall.

Business Travel

“But what about business travel?” I hear you ask?

I once attended a work conference, which across the pond in Anaheim, California. I took my credit card for ’emergencies’ and actually ended up having to use it when I found my employer had failed to pre-pay my bill.

At my hotel’s reception desk, ready to check out, but fully expecting my account to have been settled, I learned that the transaction hadn’t gone through. Worse, the time difference between California and England meant that there was no-one in the office back at home to sort it out. I’ll admit that this was a time when I was glad I had my personal credit card.

However, this does not deter me from my plastic surgery. What I’d do in the future is request a corporate card, rather than rely on my own personal card, which required me to claim this expense on my return. No corporate card? No travel!

But a credit card’s for emergencies!

In my last post, I wrote about why I believe we all need an emergency fund.

In fact, a fully funded emergency fund should contain 3-6 months of expenses. So, if we have a fully funded emergency fund, we shouldn’t need to use the ‘shopping hangover’ method to cover unexpected bills.

The post-Christmas hangover

As the nation anticipates its post-Christmas credit card statements, I decided to do some research on card spending. What I learned really shocked me.

The UK’s spending habits

In October 2017, an article in The Independent warned that credit card lending was on the increase, in spite of warnings about the high levels of UK household debt. In the article, journalist Ben Chu cites regulators’ concerns about the extent to which households are turning to credit to finance their consumption.

Indeed, in the previous month, we saw headlines suggesting the UK was experiencing a ‘debt crisis’, as household debt had increased by 7% in the preceding 5 years.

Going slightly further back in time, the sheer volume of annual card sales is revealed in the UK Cards Association’s report of April 2017. I was staggered to read that, in the month of April 2017 alone, 315 million purchases were made on a credit card (up on the previous year’s figures by 41 million transactions). The overall total of money spent on a credit card that month was £16.8 billion (versus £15 billion the previous year).

What the hell were we all buying?

The report shows we’re using credit cards for a whole range of goods and services from food to fuel, with a marked increase in the use of cards (both debit and credit) over cash in these categories.

What if you have to use a card?

If you listen to Joshua Fields Millburn and Ryan Nicodemus’ podcast, you’ll have heard them say quite clearly: “If you have to use a card, you can’t afford it.”

In my case, if I decide to use a credit card, I’m swapping convenience for a shopping hangover. And I no longer want to do that.


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Why we all need an emergency fund

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Happy New Year 2018!

January’s blog post theme

During the month of January, I’m going to be thinking about money, as we have set some specific financial goals for our family in 2018.

It follows that my blog posts may follow a bit of a financial theme in this first month of the new year.

Holiday listening

In particular, I’ve been listening to Dave Ramsey’s podcast over the holidays. Ramsey’s consistent, straight-talking and sound advice has benefited thousands of people worldwide and his simple series of Baby Steps has helped his readers, listeners and YouTube watchers get a grip on their finances and – in Ramsey’s words – “Change their family tree.”

Baby Steps

The Baby Steps help break down Ramsey’s plan into manageable chunks and build momentum. Indeed, the small wins that can be achieved early on in the programme through these Baby Steps help psychologically with motivation.

Baby Step 1

The very first of the Baby Steps is to start an emergency fund of $1000 (or, in the case of us Brits, £1000).

This should be done as fast as you can.

If you’re already a seasoned declutterer, you may find this easier than you think. A good rummage through your garage, wardrobe or loft may yield some excess stuff you no longer need, so you may soon be able to pull together the funds to get started.

If, like me, you’ve already learned to let go of stuff, freeing up unwanted items to contribute to this initial £1k may not be too much of a challenge. It may take only the effort of cleaning them up, photographing them, then listing them online on sites such as ‘Things for Sale in Kenilworth’ (our local community site on Facebook) or eBay.

Why Baby Step 1?

Ramsey’s approach is to establish this beginner’s emergency fund so that if you have a genuine and unforeseen expense, you won’t have to go into debt to pay for it. In a later Baby Step (#3), a fully-funded emergency fund of 3-6 months worth of expenses is put in place, but this starter fund is where we begin.

When you need an emergency fund

Between Christmas and New Year, we had a sudden and unwelcome fall of slushy, grey snow. We came down for breakfast the morning after Boxing Day and noticed something was odd about the hedge that usually sits against the wall by the side of our kitchen window. The supports to the hedge had given way in the wind and snow, so the prickly shrub had lowered itself forward over the border, covering all of the smaller plants and herbaceous perennials beneath.

Thankfully, with some significant effort (and 6 hours’ commitment), my lovely husband managed to shore up the woody stems, drill new supports into the wall, and push the hedge back into place.

However, this unexpected job reminded me that we weren’t quite as lucky when the fence blew down.

When the fence blew down

On the other side of the garden, we share a boundary with our next door neighbours.

One very stormy night two or three years ago, our shared fence decided it was no longer fit for purpose, leading to an unexpected but essential replacement. This cost about £375 per family, which our emergency fund was able to cover easily.

The point of this is that, whilst you’re taking steps to get your finances into good shape, the last thing you need is a mini-emergency to set you back.

In 2016, research by the charity Shelter found that 37% of working families in England could not cover housing costs for more than a month in event of job loss. Ramsey’s approach is designed to mitigate against this and putting an emergency fund in place is a first step in the right direction.

Do you have your emergency fund in place?

If you haven’t done so already, I’d encourage you to get your emergency fund in place.

So, when the metaphorical fence blows down, you’ll have the financial resources to deal with it. Plus, there’ll be no call on your emotional reserves either, as you won’t be stressed about how you’re going to pay for it.


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