# The practical admin of a household budget: how best to do it?



## hastalavista (25 Aug 2011)

Having done the household budget in the spreadsheet for a family who are friends of mine, the question I have been asked is how will it work in practice from a monthly cash allocation perspective.

Today is the first monthly payday so the  question being asked is where does the monthly 'set aside' go.

The numbers are pretty tight 3,100 in and 2,900 is the monthly out.

This 2,900 includes 100 a month for insurance which was paid in one lump sum [1,200]  on 3rd August, funded by overdraft.

My proposal i to use a new bank account and put 2,900 into it and then keep track of spend from there by budget heading.

However the house insurance is up in October and they want to avoid paying the increased cost of 10 monthly payments.

This begs the question how to provide for such annual payments.

Thanks


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## niceoneted (25 Aug 2011)

I did this preparation years ago. It means having one very tight year where I was paying direct debits for insurances etc and also putting by month amount so as I would have the lump sum available for the next year. 
Perhaps start with the smaller annual bills, like tv license/car tax or the likes so as they are saved for and add in one or two annual bills each year (as they are on a tight budget as it is). After a few years all will be well sorted. 
If someone has a better difference in budget or they can cut back more to allow for this to happen in one year I would do that.


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## hastalavista (25 Aug 2011)

Thank you for this, most helpful.

Did you create a separate account or just run it all from one?


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## so-crates (25 Aug 2011)

I'd be inclined to create a separate account - it is easier then to isolate the annual spend and not have it subsidising more frequent expenditure.


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## niceoneted (25 Aug 2011)

I have 3 main accounts I use, one is my cash flow disposable for day to day spending - very little in this. One savings and one budget account (that's what I name them for myself). 

Money for all bills known to me goes into the budget account even for things like birthday/wedding presents, hair cuts, and the usuals tv, esb gas petrol, insurances, tax etc. 

Sometimes I pay for the hair cuts or birthday things from day to day spending account so it's being saved in the budget account.


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## mmclo (5 Oct 2011)

niceoneted said:


> I have 3 main accounts I use, one is my cash flow disposable for day to day spending - very little in this. One savings and one budget account (that's what I name them for myself).
> 
> Money for all bills known to me goes into the budget account even for things like birthday/wedding presents, hair cuts, and the usuals tv, esb gas petrol, insurances, tax etc.
> 
> Sometimes I pay for the hair cuts or birthday things from day to day spending account so it's being saved in the budget account.


 
Three current accounts? Are there charges or overheads, is there a permanent standing order from salary to these. Just sounds like a lot of work but if it works?

I'm increasingly entering every penny of cash spent in to notes on phone, use visa debit a lot so at end of month every penny accounted for so I can see which headings need tackling


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## Eithneangela (5 Oct 2011)

My advice

1) One current account
2) One Credit Card
3) Reduce as many DD's as possible (cut out SKY, Land Line, any bills paid by DD which could be paid on a one-off annual basis, including Health Insurance, Heating Energy, Utilities, Car Tax and Insurance, House Insurance, Travel Insurance, ...)
4) Pay for every purchase, no matter how small, by a Debit card linked to the current account in Ireland, and when abroad, by the Credit card (I have Ulster Bank Visa Credit and Debit Cards - purchases appear almost instantly on both cards and with online banking are very visible).
5) Pay the Credit Card outstanding amount in full each month via a DD from the current account.

While I'm not addressing the issue of budgetting using a spreadsheet, common sense should cater for the production of a list of all yearly bills, most of which are mentioned above, which should be included in minimum balance in the current account.

There's no magic in this stuff - our mother's (usually) did it in their heads and managed fine. I know there were less options (less services, less bills) but it's the core process of money management which is important.

Unlike the Government and the Banks in Ireland at the moment, in a household budget, outgoings should be somewhat less than income (always need contingency for that visit to the very expensive doctor - €50 here, €25 in France - or other emergency). 

Good luck with the balancing budgetting.


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## BoscoTalking (6 Oct 2011)

Question for Eithneangela
Why not a Current account with a VISA debit card which can be used as a visa? you get charged for both?
also do DD's cost more than paying the lump sum - generally speaking?

thanks


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## Eithneangela (6 Oct 2011)

Visa Credit card is very useful when travelling abroad - Visa Debit not always accepted.

Regarding DD's, I have found that it can cost more to pay by DD for some services/purchases.  For example, I reduced my Healthcare bill (Quinn) by paying a once-off annual amount - it would have cost more to pay by DD. So, where possible, always see if you can pay once-off. 

Hope this answers your queries.


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## hastalavista (6 Oct 2011)

Would like to get this thread back on track.

Its not about budgeting and the different ways but about the cash flows and the timing and how to provide for them.

Take  the healthcare example by Eithneangela where the total cost was reduced by paying up front.

This assumes you have the up front money [either now or T plus (between 30 and 56 days) when the cc comes in.] say its 1200 euro for 2011

However, if doing monthly budgeting, the month you pay out the 1200, u also need to put 100 aside for 2012..

Its how to do this while being screwed over by your lender etc etc is the issue.

The lenders just don't get this point that if when the goo hits the fan and they are all over you like a rash, ur cash flow in year 1 is a lot less if u are going to provide tfor the annual payments the following year.

The germ of a plan was sown earlier by  
niceoneted
here


> Perhaps start with the smaller annual bills, like tv license/car tax or the likes so as they are saved for and add in one or two annual bills each year (as they are on a tight budget as it is). After a few years all will be well sorted.


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## Janet (25 Oct 2011)

I know I'm a bit late to this discussion but basically what was mentioned is the only way to do it.  Make a list of all of your annual expenses, divide that amount by 12 and every month, you have to put that much into a separate account.  Ideally, and especially if you have problems with managing money, it should preferably be one that is not too easily accessible, e.g. no ATM card.  I used to use Rabo for this - transferred the money online and had to transfer it back to my BoI current account to use it, which took a few days (I think they may have made changes to how Rabo accounts can be used since I left Ireland so it might not be as restrictive anymore).

And for the first year, you will basically be paying those bills any way you can scrabble the money together and it will be very tight.  But it's worth it.  On the spreadsheet I use, I have a line item which is annual expenses.  That figure is pulled in from a section over to one side where I have the list of expenses listed and totalled.  Having that list always on the same page as my full budget means I also never forget what the things are I'm paying for annually so no more shocks when I receive the annual bills either.

If you're helping friends who may not be used to this kind of thing, please try and reassure them that the effort is worth it and remind them (gently) that budgeting, especially to manage a tight budget, will not give them extra money overnight.  It's a long, slow process that is absolutely worth it but definitely needs a lot of patience and perseversance to reap the rewards.


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