Working Smart Is… Strong Personal Finance Management if you’re considering a new careers change in the UK
Keeping track of your finances can be a tricky business. It is so easy to get lost amid a forest of direct debits, bank statements and credit card bills, even for the most organised of people. But knowing exactly how much you are spending, and how much is coming in, is crucial if you want to make your money last longer and go further. Here is one solution that will put you on the road to strong personal finance management.
Budgeting
The best tool for getting to grips with your personal finances is the humble household budget. This is a simple breakdown of your income and expenditure on a weekly or monthly basis. All you need is a spreadsheet (or notepad and pen!), your bank statements and your credit card statements for the last 12 months.
Start by listing down vertically all of your personal income sources at the top left of your sheet. This could be income from your career, company dividends, property rentals, benefits (tax credits etc.), or other sources. To the right of your list you can choose to enter values for monthly income or annual income (or both). It is up to you.
Note: make sure you put down the NET amount of income. This is the gross amount, less taxes – i.e. your take home pay.
Rule off your income section and then start a new section for your expenditure.
Here we’ll use the same sort of layout. On the left hand side of your sheet note down all possible expenditure items like mortgage, rent, utilities, telephone, Internet, TV subscription, car expenses, fuel, food etc.
Go through your bank statements and credit card bills for the last 12 months and look for other items you need to add to the list. Include also a leisure / holidays item line for money you are likely to spend on going out or going on holiday in the next year.
At the bottom, add a ‘contingencies’ line. You can set this at 10% or 15% of your total expenditure as a way to budget for those unforeseen expenses.
Once you have your list, note down expenditure amounts using the same annual and/or monthly format as you did for income. Total all you columns up to compare what comes in (is going to come in) with what is going out.
Surprised? Shocked? I’m sure you’ll be smiling if you see you have more coming in than going out. If it’s the other way around, don’t worry – here’s the next step!
Analysing your budget
Work out how to lower those expenditure items. Go through each one and start investigating how you can make those costs lower by:
i) Getting a better deal
ii) Switching suppliers
iii) Changing your usage
Do this with enough energy and enthusiasm, and we guarantee you’ll save yourself a whole heap of money!
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