Following on with our topic this month of decluttering one of the most important areas that can often get overlooked or neglected is our finances.
Having spent over 20 years in my previous career working for a bank I want to share with you some tried and tested strategies to help get on top of your finances in the right way. Best of all you don’t have to be a maths genius to do this, all it needs is some basic addition and subtraction.
I know that this can seem like a daunting task at times as so many people don’t manage their money properly and the prospect of understanding and improving the situation can feel like an uphill struggle. However, it is something that if you can get on top of, it can really help reduce the level of stress and constant worry that can clutter up our minds and allow you to see that there is light at the end of the tunnel.
Allow Some Time. Like anything in life, it takes time to understand and improve how you manage your money so the key here is to be patient and put the right steps in place.
Budget Planner. Creating a budget planner is the first step and if you have one already in place that is fantastic you can use this guide as a way to review it. If you don’t have in place it allows you to see visually what your financial picture looks like.
There are so many options available now that makes this more straightforward from old school pen and paper to online tools you can get through your bank/building society website and also apps you can download.
The aim of a budget is to see if you have enough money coming in to meet what is going out and if you don’t it can help you start to get to grips of your finances.
Look at your income. Most of us have a good grasp on what our monthly income so this part of the budget planner is usually the part that takes the least amount of time. If you genuinely don’t know the figure then grab your payslips and bank statements and find out the figure.
Know your outgoings: All of us will have regular outgoing that are fixed and also those that can vary month to month. The fixed ones such as mortgage, loans, rates in my experience people will have a better knowledge of than the outgoings that are variable and by variable I mean our expenses that we spend our money on each month and when we check our balance we have no idea at times where the money has gone.
A simple way to get a better handle on our outgoings and expenses is to get the last couple of months bank statements and go through them to add up our outgoings and what you will also find is that there will be gaps when we spent cash or used our card on stuff and little luxuries that we can’t even remember.
Bank Statements: When looking through your bank statements keep an eye out for payments that you don’t recognise as fraudsters are getting savvier and cleverer all the time. If something looks odd query the transaction with your bank or building society just to be sure.
Direct Debits and Standing Orders: Get a list of your direct debits and standing orders, go through them carefully. So often I would have seen customers that they would have direct debits/standing orders coming out every month that they had no clue what they were even for but as they were for small amounts, they never queried them before.
Any outgoings that are not essential cancel them and you’ve already began to trim your outgoings
Are You Paying the Best Prices? We are all guilty of just letting our bills roll over and renew for the electric, insurance, internet etc but are you getting the best deal you can?
Shop around and see what offers are out there and make sure you are paying the lowest prices that you can.
Trim Unnecessary Expenses: Part of managing your finances better is taking into account every penny which involves looking at all those little outgoings we spend our money on- the gym membership we never use, subscriptions for magazines etc we never read, the morning coffee or daily lunch we buy most days of the week.
I’m not saying you should give up every little luxury you have but if say you spend £5 a day on your lunch in work 5 times a week. That works out £25 a week, £100 per month, £1200 per year which when you put it in those terms it shows how much that £5 here and there every day can really add up while going under the radar.
All I’m suggesting is if you maybe you could just consider areas that you could tweak a little here and there by setting yourself a limit of how much you can afford to spend and you could really make some savings.
Stick to the Budget: Once you have figured out what your budget looks like and what you have each month it takes effort and consistency to get used to working within your budget. The budget will need updated regularly to make sure that it works for you and can be done in a short space of time as you have already done most of the leg work creating the budget.
Bills Account: Setting up a number 2 account or bills account can help you to potentially manage your finances better. After you have worked out your monthly outgoings via direct debit and standing order setting up a second account can allow you to once your salary comes in you can leave the amount you need plus a little extra to cover say your mobile phone bill being higher one month in that account. Then you can transfer over the remainder of your income to a second account which you can use as your account to spend freely without the worry of having to make sure you have not overspent and not left enough in to cover your bills.
Don’t Bury Your Head in the Sand: If your finances are out of control and you can’t get them back under control as much as it can be embarrassing to ask for help it’s good to know there is help out there.
Speak to your family or friends, call into the bank/building society for help or book an appointment with your local Citizens Advice Bureau and talk it through with them.
I’m a big believer that there are not too many problems in life that can’t be solved by talking about it and asking for help.