I still get butterflies logging in to online banking. I’m not sure why – I know, ballpark, how my account is looking – but I can never quite shake the nerves.
It must be a learned behaviour: I’d spent years never truly knowing where my money was going (and going it was) so I was anxious whenever I checked my balance.
About a year ago I decided to do something about it. I was going to log every transaction I made (no matter how small), group them into as few categories as possible, and see if I could learn anything from my spending habits.
And even though I’m (basically) a millennial and there’s an app for this sort of thing, I did it all in a spreadsheet.
I should say at this point that I have two young children, girls, and my wife and I decided that, as we could just about manage on one income, she would care for the children until they were old enough to go to primary school.
And one final disclaimer: some or even all of this is fairly basic money management and may not at all be revelatory to you. Don’t think less of me.
Anyway, here are three things I learned in the last 12 months…
1 The little extras cost more than you think
Goodness me, life is expensive. I hadn’t quite realised. In my head, I would quickly total up our direct debits and spending on food (a guess), plus, say, £400 for extras and, hey, there was an amount left over. So where was it?
My juvenile mistake was underestimating how much these extras cost in total: a Saturday afternoon swim, a trip to soft play, new shoes for the girls, extra bread and milk, a birthday present for my sister, an MOT, parking, cash for this and that...
It turns out we were (are) spending between £600 and £700 per month ‘living’. It wasn’t even a small underestimation.
So the lesson was a simple one: we didn't know how much we were spending. Now we could see in black and white where our money was going. A pressure lifted. And it meant if we wanted to cut back on anything, we knew what difference it would make.
2 I discovered where we were overspending and did something about it
For a long time, I hadn’t bothered checking whether our TV and internet deal was still the right one for us. We’d been lured in with a great introductory offer which had run its course and were now paying full whack.
So I looked at what else was on the market, tweaked our package, haggled a bit, and saved us about £35 a month or, a better way to think of it, £420 a year.
I wondered what else I should check. Were we overpaying for our gas and electric, breakdown cover, or mobile phones? After a bit of research, I thought we probably were, so we changed those too. We also had a packaged bank account, but I won’t go into that here.
All of this is straight out of the Martin Lewis playbook, I know, but it’s been worthwhile, and we now feel like we’re getting a bit more value for money.
3 Saving is worth it
I’d always been interested in investing, but it felt like an alien world. And I mistakenly believed investing wasn’t really worth it unless I had a decent amount to begin with. Like a jump-start.
But we wanted to start saving for the future. We weren’t certain what for exactly – deposits for first homes and university fees were mentioned – but we felt it was worth starting, and soon, if we could afford it.
So we opened our first Stocks and Shares ISA and put in £20 per week. In ten years’ time, our ISA is projected (repeat: projected) to stand at more than £16,000. If, today, we upped our contribution to £30 per week, we’re told it could reach almost £25,000 a decade from now. And if we stretched to £50 per week (we can’t), we could be looking at about £41,000.
That’s the tricky thing with investing: nobody knows for certain what will happen in the future. That’s the ‘risk’ they talk about. It’s possible to get back less than you put in, though that risk decreases the longer you invest. The figures above, by the way, are based on the performance and volatility of where our money is today, but between 2006 and 2017. The next ten years will in all likelihood be different.
It feels good to know we’re putting something away. And it’s actually fun to see how market fluctuations affect our investment on a near daily basis.
And so ends this quick snapshot of why I decided to scrutinise our spending. Using a spreadsheet might not have been wise, but understanding our spending habits has been worth it. For the little bit of financial confidence it’s given us, at least.
Scott Sinclair is a content strategy manager at Zurich