Paying Myself First
Friday, October 24th, 2003 19:10![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
kittiwakeMy overtime for the last quarter was paid this week. It is only about 500 quid and I have decided to be sensible and use it to pay some extra off my mortgage. The company share price is on an upward trend again, which is good news. It needs to keep going the same way until next May when my first Share Save Scheme matures.
On a monthly basis, paying myself first means that my regular savings are transferred by standing order the day after payday and that I have direct debits set up for my credit cards to pay off the full amount every month. The exception to that is my 0% credit card, on which I only pay the minimum, but I have got the full amount sitting in a savings account ready to pay it just before the 0% offer runs out in March.
I have two current accounts. My salary is paid into the first one and it has the direct debits and standing orders for savings, investments, bills and charity contributions are set up in that account. The day after payday, I automatically transfer money into my second current account, and that is my spending money for the month. The credit card payments are also taken from that account, as I try to do a lot of my day-to-day spending on my 1% cash back credit card.
I very much resent having to plunder my savings accounts after the money has reached them. It has to be a real disaster for me to give in and fund something from my long-term savings. However, I also have various short-term saving accounts which I do allow myself to think of as available for use, including one for holidays, one for Christmas and one for paying less regular bills where I also keep a buffer in case of unexpected expenses such as plumbers bills.
The problem with paying myself first is that my spending account is run on a
knife-edge, constantly teetering on the edge of overdraft (and often falling over in the last week before payday). Luckily I'm allowed a £100 interest-free overdraft on that account with only a very small fee for using it, and £100 pound is enough of a buffer that I have never gone over it. I keep thinking of upping the amount I transfer to my spending account, but I know that I should be able to live on the amount I allow myself, and I just need to be a little bit more thrifty in order to live below my means.
Actually as I was writing that, I realised that since I started organising my finances this way (maybe three or four years ago), I haven't even increased my spending money to allow for inflation, let alone when I've had a pay rise. For the last two and a bit I've been paying into the company Share Save schemes. I decided to save £75 in the first scheme, £75 in the second and £100 in the one that started this summer, so I'm now paying £250 per month, which is the maximum allowed. It was only this year that I funded it by stopping monthly £100 savings to my Cash ISA, the first two years I just absorbed it from my salary, which has meant that I don't have much spare money floating about that isn't already allocated to something.
Control freak? Miser? Or just thrifty? I definitely think that control freak tendencies help you live below your means. I keep an accounts notebook in my purse and use one end of it for each current account. I count all regular payments and credit card bills as going out on pay-day even though they are actually paid throughout the month, and keep a note of all money taken out of my accounts. I also keep a list of everything I've spent on my credit card on an envelope that is kept tucked into he account book and all my credit card slips go into the envelope so that I can check the bill against them when it arrives. I hope I'm not mean. I like choosing and buying presents for people and I give to charity, so I think I'm keeping my miserliness within reasonable bounds.
On a monthly basis, paying myself first means that my regular savings are transferred by standing order the day after payday and that I have direct debits set up for my credit cards to pay off the full amount every month. The exception to that is my 0% credit card, on which I only pay the minimum, but I have got the full amount sitting in a savings account ready to pay it just before the 0% offer runs out in March.
I have two current accounts. My salary is paid into the first one and it has the direct debits and standing orders for savings, investments, bills and charity contributions are set up in that account. The day after payday, I automatically transfer money into my second current account, and that is my spending money for the month. The credit card payments are also taken from that account, as I try to do a lot of my day-to-day spending on my 1% cash back credit card.
I very much resent having to plunder my savings accounts after the money has reached them. It has to be a real disaster for me to give in and fund something from my long-term savings. However, I also have various short-term saving accounts which I do allow myself to think of as available for use, including one for holidays, one for Christmas and one for paying less regular bills where I also keep a buffer in case of unexpected expenses such as plumbers bills.
The problem with paying myself first is that my spending account is run on a
knife-edge, constantly teetering on the edge of overdraft (and often falling over in the last week before payday). Luckily I'm allowed a £100 interest-free overdraft on that account with only a very small fee for using it, and £100 pound is enough of a buffer that I have never gone over it. I keep thinking of upping the amount I transfer to my spending account, but I know that I should be able to live on the amount I allow myself, and I just need to be a little bit more thrifty in order to live below my means.
Actually as I was writing that, I realised that since I started organising my finances this way (maybe three or four years ago), I haven't even increased my spending money to allow for inflation, let alone when I've had a pay rise. For the last two and a bit I've been paying into the company Share Save schemes. I decided to save £75 in the first scheme, £75 in the second and £100 in the one that started this summer, so I'm now paying £250 per month, which is the maximum allowed. It was only this year that I funded it by stopping monthly £100 savings to my Cash ISA, the first two years I just absorbed it from my salary, which has meant that I don't have much spare money floating about that isn't already allocated to something.
Control freak? Miser? Or just thrifty? I definitely think that control freak tendencies help you live below your means. I keep an accounts notebook in my purse and use one end of it for each current account. I count all regular payments and credit card bills as going out on pay-day even though they are actually paid throughout the month, and keep a note of all money taken out of my accounts. I also keep a list of everything I've spent on my credit card on an envelope that is kept tucked into he account book and all my credit card slips go into the envelope so that I can check the bill against them when it arrives. I hope I'm not mean. I like choosing and buying presents for people and I give to charity, so I think I'm keeping my miserliness within reasonable bounds.
