Financial Stratagem 1

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My financial stratagem:

  • Monthly income after taxes (net) = N
  • Monthly known expenses* = K
  • Monthly surplus = S
  • Portion amount  = P
  • Emergency Account desired amount** = E
*Monthly direct debits (mortgage, council tax, road tax, credit cards) etcetera...
** The amount you desire to have in your Emergency Account. Say 3 to 5 or more months worth of expenses.

Accounts***:
  • Current Account
  • Emergency Account
  • Mortgage Account
  • Other Account (for holidays, car upgrades ... anything really, even the other accounts)
  • Investment Account
  • Gold Investing Account
***The idea is that if you say want a holiday, and you pay by credit card, the credit card must immediately be paid the holiday amount from the Other Account. Same with gold, if you want to buy gold you must pay off the credit card debt immediately from the Gold Investing Account. Delayed Gratification - you need to save up before you buy!

Financial Stratagem to Enact on Pay Day!

  • Firstly, calculate how much you'll have at the end of the month having paid all your expenses (i.e. having paid off K):
    • Plan to have K left in your bank account at the end of the month. Reason: If for whatever reason you salary didn't come in at the end of 1 month or was delayed you can run fine for another month without needed to access emergency funds.
    • Whatever is surplus we can use below.
  • Split the surplus in multiples of P, in this order:
    1. Emergency Account (until it is >= E)
    2. Overpay mortgage (unless at max overpay)
    3. Other Account
    4. Investment Account (not whilst paying into 1)
    5. Gold Investing Account (not whilst paying into 1)
Example:

  • Monthly income after taxes (net) N = £4000
  • Monthly known expenses* K = £2000
  • Monthly surplus S = £2000
  • Portion amount  P = £100 (20 portions of £100)
  • Emergency Account desired amount E = £10000
You should be planning to have £2000 in your current account at the end of the month.
£4000 is your income after taxes, out of that comes you monthly known expenses (£2000) which leaves you a £2000 surplus at the end of the month, or 20 portions of £100.

If the Emergency Account is less than £10000, then the 20 splits go like this:

Emergency Account + £700
Overpay Mortgage + £700
Other Account + £600

If the mortgage is already at maximum overpay:

Emergency Account + £1000
Other Account + £1000

If the Emergency Account is >= £10000, then:

Overpay Mortgage + £500
Other Account + £500
Investment Account + £500
Gold Investing Account + £500