The money is going into savings at the moment, I have a few ideas up my sleeve - mostly involving travel and the house.

Bring on 2009.

For a personal finance blogger, my bank accounts are in a terrible state. I’ve exceeded my overdraft limit for the last 3 months in a row, which is costing me about £200+ in bank charges. Naturally, I’m going to be saving the documentation about the charges in the hope that I’ll be able to claim them back inthe future. It’s not really the point though.

I firmly believe that nobody should be paying bank charges because they are just unnecessary. If you need to borrow money then you can use cheaper forms of credit. That extends to me too. I mean I think £35 an item is unfair but it’s still easily avoided.

How did I get myself into this situation?

Well, the short and simple answer is that I have some expenses to claim, and money to resdistribute around my accounts that I haven’t got round to doing. This has given my main current account a cash flow problem.

The long answer is that I’m tired. I’m not keeping a firm enough grip on my finances, but I’m not keep a grip on a few other things either. My house looks like it’s been hit by an explosion of papers and clothes. I haven’t written nearly as many posts on here as I’d like to. I’m doing the bare minimum on most of my other projects. My day job is sucking up the spare energy that I have, which makes sense as I enjoy it and it pays the bills, but I am not my work. Something has got to change.

Given that I don’t want to give up anything that I currently do, and that although my day job could get easier as I get more used to my newer responsibilities but I can’t rely on that, I’ll have to find some more energy from somewhere.

I’m thinking that I need to break up my evenings a little more so that I’m not moving from thinking at work to thinking about blogging. Instead I’ll try doing some housework and practising the oboe first, and then move onto more mentally draining pursuits later.

I also reckon that I could do with improving my diet. I’m too lazy/tired to cook, and I don’t feel all that inspired about making a huge effort to cook just for me anyway. I need to work with this rather than against it, so to get closer to my 5 a day I’m going to be eating more soup. From a tin it takes about 4 minutes to heat up at most, there are several kinds I like that are somewhat healthy although they probably have more salt than is really good.

I’m open to other suggestions on the food front if you have them. To be realistic, my limitations are that I have almost no freezer space, I want to eat within about half an hour of getting home, and I am just not going to do anything that takes more than 5 minutes preparation time - chopping up the vegetables for a stir fry is far too much effort. Yes, more effort on the food front would probably be better, but I need to stick to things I’m actually likely to do.

Finally, I think I need to make more of an effort to improve my sleep patterns. I thin I would feel better generally if I want to bed about 10:30 and got up at 7am. This should have several positive effects. Firstly, I’d be getting around 7-8 hours sleep which is a good amount. Secondly, getting up earlier should mean that I’m not running late which is helpful. If I’m going to be late, I’ll catch the bus. So if there’s less chance of me being late, I’m much more likely to walk and get more exercise, which should give me more energy.

Other things I’m contemplating but not putting in to action yet include

• cutting back on caffeine - at work
• starting bouldering again - although where I’d find the time, I’m not too sure
• complete house decluttering - this needs to be done, but requires time again

If you have an suggestions for this errant personal finance blogger, please let me know in the comments.

bills

Mrs. Micah’s Costs
Rent, electricity, heat or a/c: $783/month
Water/Sewer: $28/month
Internet: $30.70/month (split overall bill, since I couldn’t track down our paperless bill)
Tv: $30.70/month (split overall bill, since I couldn’t track down our paperless bill)
Phone: $0
Mobile phone: $88-89/month, depending if we get texted.
Gas: $65-80/month for gas,
Metro fare $41.85/month metro commute (normally a few extra trips).

Total Expenses $1036.55-$1052.55 (~ £585.62-£594.66)

Plonkee’s Costs:
Mortgage £500 (pcm)
Electricity £10 (pcm)
Gas £33 (pcm)
Council Tax £54 (split per month)
Water £10 (pcm)
Internet £5.45 (pcm)
TV £11 (tv licence, split per month)
Phone £10.50
Mobile Phone £10 (new deal, used to be £25)
Petrol £82 a month (assuming around £1k in mileage),
Bus Pass £37.50 bus pass

Total Expenses £763.45 (~$1351.31)

notes

Rents for 1 bed flats in my not very salubrious area range from £375 to £700 per month, depending on niceness of the building, my mortgage is for a 2 bed terraced house, it would also rent out for about £500 or so a month. I don’t have a cable or satellite tv, but use a free digibox to get additional channels, cable starts at £9 a month and satellite from £17 a month. I don’t have a car, but estimated petrol costs from fuel consumption figures for a Ford Ka.

food

Mrs. Micah very kindly gave me her last set of food purchases, which I then comparison shopped in Tescos (£1 in 7 in the UK is spent at Tescos). This is about half a weeks food shop.

Mrs. Micah Shopping List
1 gal fat free milk $3.99
1 lb nonfat cottage cheese (tub) $2.00
2 28oz cans tomato puree $2.00 ($1/ea)
1 15oz black beans can $0.50
12.3 oz extra-firm tofu $1.79
16oz natural peanut butter $2.99
16oz canned mushrooms $1.39
8oz canned mushrooms $0.80
Loaf whole grain cinnamon bread $2.47 (sale)
1 lb brown rice $1.79
chicken thighs $3.02 ($1.99/lb)
9oz packaged spinach $2.99
celery hearts $1.99
2 lbs baby carrots $2.79
green peppers $1.44 ($1.69/lb)
bananas $1.35 ($0.59/lb)
3 kiwi fruit $1.50
1 bunch scallions $0.69

Total Cost = $35.49 (~£20.04)

Equivalent Purchases in UK
3.308ltr/6 Pints Skimmed Milk £2.24
650g Cottage Cheese Natural £1.45
4 300g Tin Tomato Puree £1.92 (£0.48 ea)
1 400g Tin Organic Black Beans £0.69
349g Tofu - Firm Silkstyle £0.89
454g Whole Earth Smooth Peanut Butter £1.68
750g Value Pack Mushrooms £1.47
Sliced Fruit Loaf £0.62
500g Brown Whole Grain Rice £0.81
618g Chicken Thighs Small Pack £2.03
300g Nottinghamshire Spinach £1.20
Small Bunch Celery £0.50
2 440g Prepack Mini Carrots £3.00 (£1.50 ea)
700g Prepack Peppers £1.38
6 Bananas Loose £0.84
Prepack Kiwi £1.49
Warwickshire Salad Onions Bunch £0.64

Total Cost = £22.85 (~$40.44)

food notes

I substituted for the Cinnamon Loaf as Fruit Loaf is more common in the UK, elsewhere some of the amounts aren’t identical, but it depends a lot on the package sizes that were available to each of us. For example, celery isn’t available in small bunches to Mrs. Micah, but is to me, whereas it was cheaper to buy twice as many peppers for me than the amount that Mrs. Micah picked up. Canned mushrooms are unheard of, I substituted fresh button cup ones instead.

Tofu, black beans and peanut butter are not particularly common purchases in the UK. Peanut butter in particular is nowhere near as ubiquitous in the UK as it is in the US. There isn’t an obvious substitute, as most of the other spread things - marmite, jam, marmalade, honey - don’t have quite the same usage. The black beans and tofu that I chose were pretty much the only ones available.

summary

Overall, and somewhat unsurprisingly to anyone that has spent time in both the UK and the US, it’s quite a bit cheaper in America - around 20% cheaper at the current exchange rate. Let’s not forget that DC is notoriously expensive, and where I live - being neither in London nor the South East - is not.

To put it into context with the exchange rate, that would have to come down to around $1.40 to the £1 for expenses to be roughly the same for each of us. But, the Big Mac Index which estimates the true value of each country’s currency would suggest a natural exchange rate of $1.60 to the £1, suggesting that the UK is intrinsically more expensive than the US - something that every British tourist to Florida could probably tell you for free .

My sister was visiting me last week, and naturally (!) the conversation turned to personal finance. A few months ago, she moved into a very nice little flat with her boyfriend - they’ve been together for several years now.

As it happens, he earns slightly more than her, probably in the region of £200 per month in take home pay, but they split the rent and the bills equally. Since she’s not blessed/cursed with the fear of debt, she’s currently paying off her credit card debt, and can’t devote additional money to investing although they are both saving to visit New York in the next few months. She is not a debt-free Dave Ramsey devotee (she’s never heard of him) nor does she have an interest in personal finance.

I thought that it would be fairer if they (my sister and her boyfriend) split the bills according to percentage of income. That way they would have more similar amounts of disposable income, and my sister would have more cash available. Since I’m not the sort to interfere (well, not very much anyway) I only mentioned it in passing. But, what do you think?

Based on your feedback I’m…

…not going to say anything, as it’s not my place. But in case I’m ever in the same situation, I’d certainly give some weight to any good arguments you can put forward.

Image by strollers

The other day, Catherine Shaffer @ Wisebread asked if six figures was really that much. This inspired me to work out what income it would take to sustain my semi-ideal young professional lifestyle.

For the purposes of this, we’ll imagine that I am living in my existing house, and that the only things that I want to alter are my discretionary spending, and my savings and investment rates. My existing spending on housing and bills is around £730 a month.

eating and drinking

Ideally, I’d buy reasonable quality groceries, and have the delivered, not buying extravagantly, but not worrying about the cost. I estimate that would be about £50 a week.

In addition, since I hate making my own, I’d want to buy lunch everyday at work estimated at a generous £5 a day. I also really like to eat out, ideally I’d have a Sunday pub lunch out, have a snack lunch in a cafe on Saturdays (estimated at a combined £15 a week), and once a month go to a proper restaurant (estimated at £30 a month). As an aside, when I had a serious boyfriend this was pretty much how often I’d eat out.

I’d also like to go out for drinks once a week spending on average £30 a time - this would be very variable, most of the time I’d spend quite a bit less, with occasional splurges.

hair, beauty and clothes

It costs me £35 to get my hair cut, and ideally I’d have that done once a month. I’d also like to buy expensive-ish beauty products (Clinique, YSL, Lancome etc) and occasionally get my nails done, for a combined £25 a month.

Last year I went on a spa day with my sister, and I’d like to repeat that annually, but make it a residential thing - approximate cost £400, including accommodation and treatments.

Finally, I’d love to have some better quality clothes, but I’m a minimalist, I think £200 a month would keep me happy.

travel

It would be quite nice to have a car, as many other young professionals do, I think would cost me about £300 a month. I’d be driving to the supermarket, and making occasional trips home, and to Ikea of course.

I love to explore new destinations and I’d like to take a two week holiday each year, plus 4 or so weekend breaks. For the two week trip, I’ll estimate £600 in flights, £500 in spending money, and £400 in accommodation. For each weekend break, I think that £150 in flights, £150 in accommodation and £100 in spending money would on average cover it.

house related things

I’ve confessed before about my love of house magazines, so I’ll enable that with 4 or so magazine purchases a month, plus £200 a month buying all the great things that I see in there.

savings and investments

I am of course a sensible personal finance person, so I’d want to save and invest my entire ISA allowance of £7,000 and put away 15% of my salary towards my retirement, as well as donating a tithe - or 10% - to worthwhile charities (almost certainly not churches).

and the income required is…

After doing a bit of fiddling around (since retirement investments and tithing are dependent on gross income) and using a take home salary calculator, I would need an income net of tax and national insurance of just over £3,700 per month, which in turn requires a gross income of £85,000. I would conservatively describe this figure as more than three times my current gross salary.

What’s funny to me, is that I don’t think I’m being particularly unusual in my spending suggestions. I’ve based them on both my own habits, and those of other people that I know who are also single, professional, and in their 20s. And none of the people that I’m basing this on are likely to be earning as much as half of the £85k it would take to do all of it.

Life really is about choices, and I’m unlikely to ever have the money to spend doing all the things that I’d like to at the same time. I need instead to focus on finding the things that actually make me happy and spend only on those.

Image by BaronBrian

At the moment for various reasons, I have 3 current accounts, but all of them run at near empty. By this I mean that deliberately by the end of the month they are at or close to zero - ready to be filled up with the next months pay.

There are some inherent drawbacks to this system - like if I need to write a cheque for a large budgeted purchase then I have to transfer money from my savings account first. It also means that in the event of a bank error not in my favour, I’m going to end up overdrawn. I also have to make sure that I get paid any expenses, which I put on a credit card, get paid before the bill comes in.

I’m pretty sure that if I had a float in there though, it would get spent. I’m much better off with the out of sight, out of mind aspect to my savings. Also, I’m pretty used to the zero-budgeting, zero-balance concept, and although I have a high interest current account, I make more money by using my savings account.

What do you do, and how is it working for you?

Image by coed

This weekend I’m travelling to Ireland to visit family. I’ll be taking my own packing advice, and not taking too much. Strictly carry-on only here.

Whilst I might have packing down to a fine art, I’m exceedingly good at spending money whilst travelling. I nearly always *need* a drink at the airport (a bottle of pop or something), plus I often quite fancy something to eat, even if I’m not hungry, and I’m likely to be tempted by a magazine or two. Added to that, I’ll be using Euros, and foreign money is never quite the same - everything seems to end up more expensive.

Normally, if I’m going on holiday, this isn’t a problem as it’s all budgeted for. This trip is pretty impromptu though, and it’s coming out of my regular spending money. Since the elder statesmen of the family always quarrel over who gets to pay the bill in restaurants I’m pretty certain that I won’t need to spend a lot on food. We’ll probably go to the pub, where I’ll need to buy a couple of rounds, and make sure my younger brother has all the soft drinks he needs. Then there’s all the sundries. And the money for the collection at Mass on Sunday.

I must come up with a budget for this. If I have an idea how much it’s likely to cost in Euros, it’ll be so much easier.

Image by superminx

In my new system, every thing that I possibly can gets put onto direct debit or standing order (automatic bill pay, and automatic money transfer). All my bills, all my savings, all my investments, all my donations, and now all my spending monies.

It’s been a personal finance revolution. I rarely have to write cheques. I haven’t missed a bill in months. I have no need to worry about my cashflow situation, I’ve set it all up so that everything gets moved or paid as soon as possible after pay day.

What about you? Do you like to make it automagical? Or do you prefer to pay your bills individually each month? Let me know in the comments.

Image by kevindooley

I’ll hand you over to my beautiful chart:

Just to let you know what’s in all the categories:

• Income Tax and NI - funnily enough, this is income tax and national insurance, I want to pay these to avoid jail time
• Mortgage - this is just the mortgage repayment, I’m on a 2 year fixed rate deal that ends in June 2009, so this won’t change
• Fun Money - this includes clothes, groceries, holidays, gifts, travel, pocket money, eating out and drinking; essentially all my discretionary expenditure
• Bills - gas, electricity, mobile phone, landline, internet, council tax, disability insurance; basically all the bills that are paid monthly
• Investments - pension and ISA contributions
• Irregular Expenses - house maintenance, tv licence, house insurance; bills paid less frequently that monthly
• Student Loan - my non-mortgage debt deducted via tax withholding, and with an interest rate tied to inflation, this is being paid off as slowly as possible
• Savings - there’s no particular purpose to this money, it’s as much as I can be certain of being able to squeeze out of my pay easily
• Charity - an inadequate sum to be sure, this is the money that is budgeted and paid by direct debt to my chosen charities, I’ll almost certainly donate to charities from my fun money if it seems appropriate

More canny people may have realised that my target is to invest 16% of my income in 2008, not 13%. To do this I need to grow my income, which I’ll do via blogging, payrises, maybe selling some excess vacation days and anything else that comes up.

What do you think?

Income

Coming in to my bank accounts, in 2007 I had:

• Job - £26,000 ($52,000)
• Stock Option - £14,000 ($48,000)
• Gifts - £1,000 ($2,000)
• Employer Pension Contribution - £800 ($1,600)
• Side Income - £650 ($1300)

A grand total of £41,600 ($83,200). Oh that is an awful lot of money, where on earth did it go?

Expenses

Tax

• Tax & NI on Salary - £7,500 ($15,000)
• Tax & NI on Stock Option - £5,500 ($11,000)
• Tax & NI on Side Income - £140 ($280)
• Council Tax - £500 ($1,000)

Loans

• Student Loan Payments - £1,000 ($2,000)

Investments

• Stocks and Shares ISA (like a Roth IRA) - £1,000 ($2,000)
• Work Pension (DC - like a 401(k)) - £400 ($800)
• (Useless) Stakeholder Pension - £1200 ($2,400)

Savings

• Cash ISA - £2600 ($5,200)
• Other Savings Account - £500 ($1,000)

House

• Deposit - £10,000 ($20,000)
• Fees and Moving Costs - £3,500 ($7,000)
• Furniture - £140 ($280)
• DIY Tools and Supplies - £350 ($700)
• Rent - £2,250 ($4,500)
• Mortgage Payments - £3,000 ($6,000)
• House Insurance - £560 ($1,120)

Miscellaneous Bills

• Phone (inc Internet and Mobile) - £550 ($1,100)
• Gas and Electricity - £700 ($1,400)
• Disability Insurance - £300 ($600)
• Charity - £350 ($700)

Holidays

• Brussels - £300 ($600)
• Washington DC - £700 ($1,400)

Gifts

• Total - £450 ($900)

Blogging

• Total - £100 ($200)

Spending Money - this includes clothes, groceries and random stuff

• Total - £4,500 ($9,000)

People that are handy with a calculator will note that I spent just under £6k more than I earned last year. The extra money was withdrawn from my savings and is basically the money above my stock options that I invested and spent in buying a house.

I’m not sure what I’ve learnt from this as last year was such an unusual year for my finances. I think that I need to track my random spending to see if I can cut it down (which I’ll be doing by using a cashback debit/credit card). I’m also planning to increase my savings and investment money, assuming that I get any sort of pay rise in April.

Would anyone like to suggest where I might like to spend my money in 2008?

Edited to add approximate US$ conversions