Hi,
Was just wondering what sort of 'system' everyone has for investing once they have been paid? Do you invest a fixed amount on payday, or do you wait until the end of the month and invest whatever is left?
I'm paid weekly and so on each payday I transfer a fixed amount into another account from where my mortgage is collected. I then transfer another amount to a slush fund, which pays for vehicle costs such as repairs, insurance and tax. I also have another account where I transfer a small amount each week for gifts for people's birthdays, Christmas etc. Then I take a fixed amount (currently 37.5% of my net pay) from what's left, which I invest. The remainder is used for bills, food and any other expenses.
On the whole this system works for me, but the margins are so tight that when an unexpected expense crops up I often have to use money from my liquid emergency fund, which I replace over the following few weeks. I therefore feel that my system is a little bit complicated and am looking for ideas to simplify it. So what do you do?
Why don't you:
1. Have your mortgage collected out of your main account?
2. Allow a bit more of a buffer to accumulate in your main account? Not investing for one month would give you a significant buffer which would mean you could whip out your debit card with ease.
We have four current accounts: joint, my personal, husband’s personal, my business.
My husband’s pay comes in monthly on the 1st. Every bill that let me specify comes out on the 3rd. As of recently, £333 a month goes into my husband’s LISA. On the 3rd: personal money goes into each of our personal accounts, money goes into an eSaver (for: holidays, quarterly wine orders, annual insurance, misc expenses like home improvements). We pay for food and transport with joint account debit cards.
My pay comes in intermittently to my work account. I keep a £1000 buffer in there because I usually have to buy materials and be reimbursed and it makes my life simpler if I don’t have to panic about being reimbursed. I know people who buy materials on a rewards credit card but the rewards wouldn’t be worth the stress for me. We save* out of there intermittently depending on when I work, when I get paid, and what big work expenses I might have coming up, so it tends to be lump sums between every month and every quarter. I do it manually because I don’t know when it will be or how much it will be. The £1000 is also our emergency money.**
So yeah, it’s not simple exactly but it feels like the appropriate groupings of money for us and we’re not operating so close to the line that we go into overdraft. When you say “unexpected expense” and “liquid emergency fund”, what do you mean? We have money for bumpy expenses in our eSaver at the same bank as our joint account and it’s no trouble to log on and transfer the money across instantly into our current account because we know in advance when they’ll be and what they’ll be. September? Insurance time. Planning a holiday? Transfer the money before I book our accommodation. We have yet to have an expense that is so sudden and unexpected that we can’t find time to get at that money – and if we do, there’s my work buffer.
As for the time I spend managing our money… I do a ‘monthly report’ categorising our joint account expenses. Takes maybe half an hour with internet banking, a spreadsheet and a cup of tea. Food, transport, joint going out and house stuff are the only categories that really vary. When we have a ‘bumpy’ expense, I take five minutes to log on and transfer some money over. When a bit of money has built up in my work account, I take five minutes to log on to my investment website of choice (currently straddling HL and Vanguard) and invest it. A while ago I tracked my personal spending very closely for three months, mainly to find out I spent it all on snacks. Now I know that I’ve stopped tracking until I find myself in the position of standing there at the end of the month thinking “but where did it GO?!” again.
*I always call it saving but what I mean is investing.
**I mean serious emergency where I need to be able to whip out a debit card and pay for it RIGHT NOW. Like we’re stuck in a strange city in the middle of the night and need to eat and sleep, or our boiler just exploded and we need a plumber round within the hour. It’d cover us for a day or three until we could get at our other money.
FWIW, it doesn’t sound like your system is too complicated. It sounds about as complicated as mine, and I find ours easy to use. It just sounds like maybe you’re not categorising your money in a way that aligns with the way you spend it. Why does insurance and wine go into the same account for us? Because they’re both the same kind of expense to us (planned but non-monthly).