Budgeting archive

After the touch of reality reflected in the last post — how my over-spending and wastefulness was contributing to an unsteady financial future w/r/t buying a new house — I was already feeling a touch the poorer. So as you can imagine, when my accountant (well worth the spend) did my tax return for the ’15-16 tax year a couple of weeks ago, you could say that the paperwork hit me like a ton of bricks.

I knew the tax bill was incoming, but I’d been ignoring the potential size of it (especially since I blew my savings on a website) and holy shit was that a mistake. With tax owed, tax on account for the ’16-17 financial year and accountant fees I suddenly had just over two weeks to find £3,000. And here I am, a couple of days from the dreaded tax deadline, and I’m only able to pay off the back of a loan from my husband and a big credit card bill. (I am a responsible adult, honestly.)

So… up shit creek without a paddle I sat down and thought to myself: my ‘half’ of monthly expenditure (household bills, mortgage etc) is about £750. I make plenty more than that each month — certainly enough to live comfortably and be putting money aside for tax bills! — so why am I sat here in such a terrifying position? Where the hell is all my money going that I constantly in my overdraft and only have £9 in my ISA to pay my tax bill?

Wine and eating out and frivolities, yes… but that doesn’t eat through hundreds of pounds a month in income, surely? (Even with my wine consumption levels?!) To Excel!

I started adding up all of the yearly expenses that aren’t on my basic month-to-month budget. Hosting bills, domains (again!), WordPress plugins, memberships, magazines, software and SAAS ‘apps’. I’ve not finished logging and I’ve already totted up over £3,600 worth of yearly expenditure which totals over £300 per month. Start adding wine and eating out and frivolities to that and it’s not too hard to see where my income is going.

It’s an easy trap to fall into: pay off an expense in one lump sum, and forget it exists until next year. But it does exist, and it is chipping away at the money I could be using to pay off debt and my mortgage. It’s no wonder I’m up shit creek when I’m easily spending nearly £4k a year on things I don’t give a second thought to.

Am I the only one this disorganised? How many people actually have a handle on their irregular / yearly expenses? It’s probably about time I started using YNAB again…

Feels like ages since I’ve talked about budgeting, and for a reason… with excess spend on frivolities, a loan to pay off two credit cards one of which I didn’t close and am steadily filling back up, an expensive honeymoon (which I barely contributed towards) back in October 2016 and the increased cost of US-based services since the Brexit vote, it’s obvious I’ve had my head firmly planted in the sand. Or up my arse, if you like.

But I have a problem. And not just the problem of big scary debt which I promised myself I’d never get hooked into: the problem of a mortgage deal that ends in just over 12 months time and only self-employment income to prove my ability to buy or re-negotiate. If I have extra debt when it comes to sorting out a new deal, nobody is going to touch me. All of my mortgage over-payments will have been for nothing.

So I have a year. A year to do all the things I’ve blogged about doing a million times: reducing outgoings, making my projects successful (or closing them down) and putting any ‘side’ income straight into debt reduction.

And as that won’t be enough on its own, I have no choice but to go back to full scale frugality as per maternity leave income levels: meal planning, £20 a week shops, turning the heating down to 19 degrees and putting on an extra jumper… the kind of money saving stuff I used to do as par for the course.

I know I can do this, I’ve done it before. So why does it seem the most daunting of all my plans and goals for the year?

Gaz is away til late tonight so I have 3 options:

• Catch up on some more work, which I need to do.
• Catch up on some housework, which I should do.
• Have a bath and go to bed with a bottle of wine and a book, which I want to do.

Unfortunately after today the odds are looking likely on #1.

In the unlikely event that you’ve not already heard, today we – the UK – voted to leave the European Union. In my humble opinion this is a terrible idea for the country, for the economy and for people as a whole and so I voted to remain. However, little did I know – until this morning – it would also be terrible for me: thanks to the pound crashing to a 31 year low, a lot of the online services I rely on to do business (everything from hosting to Github, my accounts package, etc) have skyrocketed in price.

Unless the pound recovers quickly, it will become financially infeasible for me to continue using some of these services: I’m now faced with the prospect of moving half of my websites to UK based servers. (They’re not abroad because of an “indian call centre” money saving thing, sometimes it is better for a site to be hosted in the same location as its target audience.)

This means that in a month where my work output is already low because of my assault and ill health I may have to spend hours working on admin and migrations rather than ‘real’ work and projects which are already overdue.

Suffice to say I’m a bit pissed off about this whole bloody mess.

I’ve just come off the phone to my current mortgage provider. I rang up to see how much I’d likely be able to borrow if I wanted to purchase a larger house using equity in this house as a deposit.

I was hoping that because of my regular overpayments to my mortgage as part of my ‘mortgage free in 5 years‘ thing, and my reasonable income for a working mother of 2 with my experience level, that I might be able to secure at least enough to upgrade from my tiny 2 bed to a medium sized 3 bed.

Unfortunately, because I am now fully self-employed, any income I’ve received over the past few years in full time employment no longer count. Because I spent much of the past 2 years in full time employment with only self employment on the side, my official SE income for 2014-15 for example is just £1700 (despite overall income being much, much higher).

So, as it turns out, despite my reasonable financial status, repeat steady business and an average income more than enough to sustain my house & kids etc, I don’t even qualify for my existing mortgage deal let alone a new one.

I understand why affordability checks are in place on mortgages: to prevent people getting in over their head and ending up bankrupt and the bank losing money. But it makes absolutely no sense to me that they can’t look at the bigger picture in terms of income and net worth. Because I blew all my savings on a website I can’t even put together a bigger deposit.

Time to kick my mortgage free thing into gear and get back on the money-saving track, I guess.

Having announced my intention to return to 100% freelance from October, it might therefore be surprising to hear that I’m also going to be attempting a pretty radical goal to try and drastically increase the amount saved to use against my mortgage balance: I am going to try and put away half of every paid invoice each month for the foreseeable future.

I don’t know if this is entirely sensible with the cost of hot desking to think about, my car insurance due in November and the dreaded bank-draining event that is Christmas just around the corner but I’m becoming increasingly aware that I’m not doing enough just bumbling along tucking away passive income. However, with something in the range of £1600+ worth of bills at the beginning of every month, after contributions from Gaz towards his half of the utilities and Karl towards childcare, I’m going to need to earn £1800 as a minimum (per month) to be able to cover the bills and put half away. That’s not including irregular and/or business expenses.

To get me off to a head start, last week I tucked away £500 into my ISA. It wasn’t quite half of the weeks income but with travel to and from Brighton and the inevitable cost of food etc while I was over there, I knew I’d need a bit more in my current account to get by. However, I did what I always do when I go somewhere “new” and I over-spent on stuff I didn’t need, so I need to start setting myself a budget for these occasions too. There has to be a happy medium between radical frugalism (is that a word) and free spending…

Off the back of yesterday’s post about earning passive income (which in itself was a kick up the bum, and I feel a little more inclined to get some of my stuff done) I’ve been thinking about other ways to earn “on the side” and one that I know is successful for a few of my friends is “comping” — that is, entering competitions regularly as a deliberate way of earning cash and prizes.

The huge rise in social media use has seen comping explode as a viable method of earning a side income over the past couple of years, as entering is often as easy as clicking ‘Share’ or ‘RTing’ to your followers. The potential for winning in some of these competitions can be huge, with prizes ranging from clothes and food hampers to cash prizes and even holidays, which is not bad for a quick ‘share’.

Take for instance leisure and hospitality site Leisurejobs: currently running a competition for a weekend trip to Paris and a Michelin star meal (flights and hotel included) and entry is as simple as retweeting a pre-populated tweet with the hashtag #perfectparis2015, or sharing the hastagged post via facebook or linkedin. You don’t have to put any effort into this one!

I’ve never won anything myself (mostly because I’m too lazy to enter) but one of my aforementioned comping friends had these top tips to share:

1. Enter Facebook competitions run by small to medium-sized businesses as they’re easier to win (there’s less competition from other entrants because the business usually has less fans)
2. If you’re a blogger, and use an affiliate marketing network (e.g. Affiliate Window) to monetise your blog, keep a look out for competitions run by the network or the individual brands. People rarely enter them so there’s good odds.
3. Go the extra mile – don’t just write 200 words and put a picture in. Spend a little extra really putting in some effort into your entry and you’ll stand out. Check other entrants out too (e.g. in comments section or by viewing the hashtag) and try and out do the other participants!

In addition to that, it’s worth considering:

• Joining a forum for compers to get access to new competitions before they hit social media
• Set up a dedicated email address for your entries, so that you’re not spammed to death between competitions
• Always check the competition close date so you’re not wasting effort on something that’s done and dusted

Worst case scenario, you don’t win. But they say nothing ventured, nothing gained. I might even enter the Paris one myself…

I talk about passive income every now and again on my blog, so I thought I’d talk about what it means to me.

What is passive income?

Passive income is money I ‘earn’ without the need to specifically do anything to get it. That is, income that just drops straight into my bank or PayPal account without having to intervene or work or any other unpleasant and/or boring activity.

Why do you need passive income?

As I’m now (mostly) self-employed again, I don’t have the stability of a guaranteed monthly salary to depend on. Passive income is important to me because it allows me to build an emergency pot — while I’m busy doing actual, billable work — to fall back on should I be unable to work for any reason, e.g. kids, health (physical or mental); it also means that if an unexpected bill or the like comes in I have something to draw from. Eventually when this ‘pot’ is big enough it will be used to pay a lump sum off my mortgage as part of my goal to be mortgage free in five years. At the moment, all passive income goes straight into this ‘pot’ (it’s an ISA, not a literal pot).

How do you earn passive income?

I have two sources of passive income at the moment:

1. Income from my premium mail form sales
2. Income from adsense advertising

(I earn dribs and drabs from affiliate marketing which many see as passive income too, but more often than not the effort required to get to this point far outweighs the pennies I get back.)

Of these two sources, advertising is obviously the easiest. I dropped the provided code from Google into my blog sidebar, mail form site, WAHMweb etc and watch the pennies trickle in. Making money from my mail form is rather different; although I generally don’t do anything month to month to drive those sales, obviously I had to write the form in the first place. I also occasionally have to drum up sales, which I’m not particularly great at (because of laziness, not necessarily lack of skill). The required initial effort and occasional shameless plug are not “passive” but in terms of overall work I don’t do a significant amount month on month.

How much do you get?

It’s taken me a year to earn £60.10 through adsense so it’s hardly lucrative, but £60 is better than nothing.

The mail form makes the most money out of the two (although still not making me rich): I’ve had 12 completed sales since it launched in February, totalling £228. After subtracting fees (£11.63) and ‘software’ costs (£107.32) there’s a total ‘profit’ of £109.05.

Clearly I’m not going to be retiring off the back of this passive income any time soon, but it’s income I otherwise wouldn’t get.

Are you going to do more?

My grand plan is to open up a member’s only section on my mail form site, which will give users more customisation options and the ability to generate custom forms and add more/better functionality. This requires effort and energy and at the minute I’m struggling to drum up either, because I’m about as low as the time I cried into my wine.

I also have a couple of other content-focused sites which I may or may not choose to work on over the course of the next year which should bring up my income from advertising.

In an ideal world, by the end of 2015 I’d like to be making at least £100 per month in passive income so that I can increase my mortgage overpayment by that amount. I have a lot of work to do to get there…

As I woke up to another sale on my premium mail form yesterday, I felt like I’d received a fresh kick up the bum to start actively working towards my mortgage free in five years goal again.

It’s not that I’ve not been working at it — all sales of the form (minus PayPal’s extortionate fees) are routed to my ISA where it sits til I can pay off a chunk of the mortgage — but I’ve not been doing anything to increase that passive income which is going to be the key to paying off the mortgage; I’ve not released stage 2 of the mail form functionality, and my other two projects are stalling while I get back on my feet too.

It doesn’t help that I’m currently in hoard mode: that is, because my financial future is less secure now that I’m self-employed again I can’t help but keep hold of every penny. I don’t want to move money out of my current account in case I need it quickly, and I don’t want to move what’s in my ISA onto my mortgage debt because if I have a sudden unexpected bill or a few dry months I’ll need that fallback.

I’m being paranoid. I have plenty of work and my bills are being paid. I just seem to be stuck on the thinking, and not on the doing… perhaps another spur of the moment decision is in order.

As promised, I’m documenting my progress following my big kick up the arse…

This week I:

• Unlocked my online banking account
• Entered nearly 4 months worth of transaction data into YNAB
• Paid in both a cheque (which I’m notoriously lazy about) and some cash (which I’ve never done before, I just spend notes!)

So, numbers back on track. Now just to finish a project. Hmm…

I spent nearly an hour on the phone on Tuesday night with a friend of mine who’s asked to remain nameless (I don’t know why, maybe he thinks you’ll all call him up asking for financial advice too?) Following my comfort spending confession he’s given me a bit of a virtual kick up the arse and set me a challenge (and as we all know, I can never turn down a challenge).

In an attempt to curb both my comfort spending and procrastination, I’m under instruction to:

1. complete one project and/or
2. log one months worth of budget figures
3. and document my progress on here

…before I’m allowed my next glass of vodka.

I’m not sure this challenge is entirely fair. I mean for starters, vodka is important fuel for my growing body. Secondly, doing number 2 actually means pulling my head out of my bottom and unlocking my online banking which I managed to accidentally lock myself out of (but am currently too deep in a river called denial … or something) to do anything about.

But I said yes, so here goes.

One of the biggest barriers to me being mortgage free in 5 years is a bad habit I don’t tend to talk about too often: I’m a comfort spender. If I’m stressed, I spend money on anything and everything. The ironic thing about this unnecessary splurging is that it ultimately leads to me adding to my stress levels because I end up wasting money that I need to save or use more appropriately. To put this into context: I recently had to give my credit card (which I took out at 0% interest purely for emergencies when solicitors fees swallowed my savings) to Gaz to look after because I spent £57(!!!) on a dress I didn’t really need.

I have good months and bad months. At the minute, despite being hugely anxious about work and my impending return to freelance, I am also incredibly aware that I have no choice but to cut all non-essential spends for the foreseeable future. Over the weekend I managed to keep my spending low despite being out and about, yesterday I spent just £15 on groceries for the week and I have successfully resisted the urge to buy an extra set of barbell weights (which I ‘need’ to progress my lifting).

Although… I did have a minor slip this morning and spent £1 on a box of Cadbury’s chocolate fingers, oops.

I know I’m doing it, even as I shop. I know I’m wasting money. I browse online shopping sites and tell myself as I go along “you don’t need this” and “you can’t afford this”, and then end up clicking “buy” anyway. Sometimes I add a ton to my basket and get as far as checkout before I come to my senses and browse away (but sometimes I don’t).

I know I do this for the feeling of pleasure I get both completing a purchase, and also when the things I’ve ordered arrive, but I also know that this feeling is fleeting and is soon replaced by spending regret, or (often worse) complete indifference: because that means the hole I’m trying to fill remains a void. I also know that I primarily spend like this on days where I don’t have my babies at home. I’ll leave you to fill the gaps there.

The question is how do I stop myself from doing it? How do I employ enough willpower to stop the spending (especially when I feel like my strength & willpower is exhausted just getting through the day at the minute)? I suppose I could buy a book on comfort spending habits…

Tomorrow marks a month since I secured a new mortgage on my home, giving me the funds I needed to complete “project £20k” thus buying Karl out and transferring the deeds to solely my name. In total: £97,617.23 — £77,617.23 to pay off the old mortgage and £20,000 for Karl.

This week the first mortgage payment came out of my account, taking the mortgage account balance to £97,467.00

You’d be forgiven for thinking my mortgage payment was £150.23, because that’s what you get if you subtract the current balance from the original lending figure. Except it wasn’t: it was a nice round £500, which is made up of £477 actual mortgage payment due and £23 overpayment which I set up as soon as my mortgage went through (because I can afford an extra £23 but if I have to manually transfer it each month I’ll find other ways of using it!) This basically means that in a month I’ve accumulated £350 worth of interest.

THREE HUNDRED AND FIFTY POUNDS.

How am I going to be mortgage free in five years if I blink and £350 is added to my mortgage balance? Well, here’s what I’ve done so far:

• I released the premium version of my mail form and have started working on the membership area. If I can sell 1 copy of my premium mail form a week for a whole year, that’s £939.12 which would take 4 months off the term of my mortgage and could save me £1,174 in interest.
• I transferred some money from freelancing straight to the mortgage pot. If I can work just a few hours a month for a year I could earn around £1600 which would take 7 months off my mortgage and save me £1,985 in interest.
• I’ve done a lot of work on Soft Play Reviews, a project I started two years ago, and if I can earn just a couple of quid a week through ads I’d save myself £131 in interest.

Combined, just these 3 things could take a year off my mortgage and save me £3,240. Even if I can’t be “mortgage free in five years”, who can balk at saving over three thousand pounds?

Other things I’ve done this month:

• I didn’t eat out because of whole30, which saved me money.
• I was more careful about what I was eating (again, because of whole30) and this also saved my money: the idea that whole30 has to cost a bomb is hugely erroneous.
• Sold some old things on ebay which have been sat in the back of my wardrobe for years, and made £91.11 (minus fees) … although I imagine a big chunk of that will go on postage!

Can I keep up the momentum? Can I do even better? Only one way to find out…