Understanding where the heck you are now, and how you can start to find your way out

Even though you may not have had that much to do with running the money side of a household before, managing your money is not rocket science. Believe me, getting to grips with your finances can not only be fun, it is also immensely rewarding to see the pounds go further. But, absolutely best of all, it can give you back some feeling of control and security and really help with moving on.

DEVELOPING GOOD HABITS
However it can be hard to do get into some habits so that you know exactly what you have, what you are spending, what risks you are running, and how much more money you need to achieve your financial goals. Managing your risk is important and in this context by managing your risk I mean thinking about the things that could really knock you off course, illness, redundancy, interest rates rising. You need to address them and see which you can manage.

PLAY THE GAME…. AND WIN
Behaving like an ostrich is what the financial services industry expects you to do. They assume you will not be bothered to shop around, that you will be sloppy with your management, that you will be complacent and, for example, not pay bills on time so that you will let your levels of debt notch up and they’ll make cash! Beat those bad boys at their own game and make your money work for you and do not waste any.

So start by making some resolutions, open your bills, read your statements as soon as they plop on the door mat. Save them all up and once every month have a nice glass of wine and rootle about your figures.

SETTING GOALS, KNOW WHERE YOU WANT TO GO
Write down financial goals. Be as specific as possible though try and be realistic. Don’t however believe that your goals are unobtainable just because you can’t afford to attain them now.

Long-term goals might cover areas such as:

  • Buy the house
  • Holidays
  • Education
  • Retirement
  • A saving pot
  • Private health cover

    They are great to have written down and will help to remind you and to focus you, particularly with regard to increasing the income levels coming into the house.

    HOW TO ACHIEVE YOUR FINANCIAL GOALS
    Consider how you might achieve these goals by looking at some shorter-term factors such as

  • Looking at debt
  • Reduce expenditure
  • Increase income

    Which comes back to sort of boring old look after the pennies etc. This is really more about changing your financial habits and developing new ones. Very like going to the gym, a bit of a pain to get started but once you see the benefit it can really make you feel better and more in control.

    ESTABLISHING AN OPERATING BUDGET
    Establishing an operating budget is important and to do this you need to know how much money you owe and how much you are spending. This critical step is often ignored because it might be hard to see how little you have and how much you owe. You need to gather the evidence.

    Take an evening this week to gather information about the following:

  • DEBT. Gather together evidence of all your debt. Credit cards, Store cards bank accounts loans mortgages etc
  • BILLS. Try and find your last utility bills Water / Gas / electricity/ Council / etc Mobile bills
  • STANDING ORDERS
  • POLICIES. Household insurance / Mortgage. Life Assurance etc

    Now lets have a crack at these….

    DEBT
    Getting out of debt can be a long process, but don’t be discouraged it can be done. Try and work towards putting all your debt in one place at the lowest possible rate. Then cut up and destroy credit cards that you are not using, save one for emergencies.

    Companies that might offer low rate, beware massive penalty of not paying or failing to meet payment within fixed time period. Talk to your bank about helping you out of debt, by providing a flexible loan. But don’t forget, loans to cost more than the amount you borrow – can you manage to service your debt without one? Spend less?

    BILLS
    Manage your bills by getting the best rate for your utilities, try and manage your landline and make sure you really have a long hard look at the mobile deal you have.

    Do you have a water meter? If you don’t you will be charged a fixed rate irrespective of how much you use but related to value of house.

    In order to receive 25 % of your council tax you merely need to inform the council that you are in a household with one adult.

    Note on your financial calendar when these bills are due and if you feel comfortable paying over 12 months actually set up that direct debit that you have been meaning to.

    If you pay for household /travel/health insurance check you have the best deal for you.

    DAY TO DAY EXPENDITURE
    This is a rather painful exercise though if you can manage it have a go.

    Write everything down that you spend in a one-month period. I mean everything and not just the amount, but what you spent it on.At the end of the month analyse your spending. This will not be an odd month, they all are.

    Then for the next month set yourself a little game to see how cheaply you can live without changing your lifestyle. Write a list of how you might do this that fits in with how you want to live. Mine might include some of the following.

  • Menu planning and then only buying that
  • Grocery shopping at Safeways or Asda
  • Children’s present buying cannily
  • Seek entertainment at the library or all the free museums around London
  • Be a model at Vidal Sassoon for a good cheap hair do. Note from Emily – be warned only offer yourself for students to practice on as then you get the hairstyle you want, if you’re a demo model they’ll do the style they’re teaching regardless of what you look like with it! My mother disowned me!

    And then analyse the data. There could be as much as a 20% swing.

    From this establish some good habits and develop some savvy financial well-being habits, so that you know what you are doing, where, why and at what cost. You should now:

  • Understand exactly what you are spending
  • Have addressed all the ways in which you can save money by being a bit clever
  • Set your financial goals

    GRAB THE BULL BY THE HORNS AND LOOK AT YOUR FINANCIAL POSITION

    Having control of your money on a day-to-day basis can be liberating, but it is also necessary to think about a bigger picture and think of somewhat if scenarios to help increased our feeling of security. It is also a good idea to get out there and really know what it is that is worrying you so that you can sleep at night. It could be that some of the questions listed here are niggling you….

    MORTGAGES. What if rates go up and I can’t afford my mortgage Do I have the best mortgage, what is a divorcee mortgage? I am trying to plan for the next 15 years what happens if the economic climate changes and we get back to high inflation, high interest rates? Can I protect myself?

    INSURANCE. What if I become ill? What if my children’s father losses his job What if my children’s father becomes critically ill? What if I die? What if my children’s father dies?

    PENSIONS. Who is going to pay for my retirement? What pension provision do I have from the state, anywhere else? How much do I need?

    SAVING How can I start saving? I really want to get into the habit and create a cash cushion for myself.

    These are all things you need to think about, work out what you want and discuss with an independent financial advisor.

    • ( categories: Articles | Money )