Staying in control of your finances is one of the best things you can do to help secure your financial security.
Yet, according to research carried out by Financial Capability [1], 39% of people don’t feel confident when it comes to managing their money.
Furthermore, Office for National Statistics (ONS) data [2] revealed that 4 in 10 adults did not expect to save any money in 2023.
Budgeting each month, rather than simply leaving things to chance, means you’ll be less likely to run into money problems, such as building up substantial amounts of unsecured debt.
A household budget can also help you plan for the future when it comes to both short-term commitments, and longer-term planning such as your retirement and setting money aside for your children.
Read about seven simple ways to help take control of your money.
- Set up a budgeting spreadsheet
The most important step towards taking control of your finances is to understand how much you’re spending, and how this matches up against your income.While there are some effective apps to help you manage your budgeting, a simple spreadsheet you put together yourself can also be effective. You may even want to consider using both options, as you can tailor your document to include all the information you wish.
Regardless of which method you choose, you’ll need to go through bank statements to find out all your regular outgoings. This will help you identify your monthly commitments that you can then list under different headings such as:
– Servicing debt
– Savings and investments
– Insurance policies
– Utility bills
– Entertainment subscriptionsDoing this will immediately help you identify any discrepancies, and you may even find direct debits and standing orders that you can cancel, saving yourself some money each month.
- Note down your discretionary spending
Once you’ve established what your regular monthly outgoings are, the next step is to get an idea of your discretionary spending. Go back through your recent bank statements to get an idea of how you spend your money each month. You’ll probably need to go back a few months to enable you to see if there are any particular patterns and trends.Again, you should be able to set this out under different headings, such as:
– Meals out and other entertainment
– Food and other household shopping
– Clothes purchases
– Transport costsThis will help you start building up a picture of your spending so you can plan ahead. It may also help you identify opportunities to save money – either to reduce your household outgoings or divert to savings or investments.
- Set up a secondary account for discretionary spending
A great way to control your outgoings and get a handle on your budgeting is to have a secondary account for all your discretionary spending.Keep enough money in your main account to cover your regular monthly outgoings – with a bit extra added so you don’t go overdrawn accidently and incur charges. Then transfer the balance to a secondary account that you use for all your other spending.
By doing this, you’ll know each month how much you have to spend on non-essential items and will be able to keep on top of your commitments.
- Use a spreadsheet to manage your wider financial position
The advantage of having your own budgeting spreadsheet – either alongside or instead of an app – is that you can include other content unique to you that can help you manage your money.For example:
– You can add details of insurance policies such as when they are due for renewal.
– If you have personal loans, you can note the expiry date.
– You can create a list of your credit cards and the outstanding amount on each, as well as the interest rate.You could also use your spreadsheet to store important information such as policy numbers and contact details for different items you have listed.
It’s also a handy place to keep up-to-date information about your savings and investments, especially if they are earmarked for specific purposes such as holidays or your emergency fund.
Read more: 5 great ideas to give your personal finances a spring clean - Clear any credit card debt you may have
One of the biggest blocks to a healthy financial future is credit card debt.The high interest rates mean that such debt can easily spiral out of control. If this happens, you could end up spending excessive amounts to service the outstanding amount you owe rather than be able to put that money to better use.
So, by putting a plan together, with a realistic target to clear it, you’ll be taking a big step forward to help secure your financial future. This blog may be helpful if you’re looking for more practical money tips to help you manage your finances.
- Make saving a habit
There’s a massive benefit to be gained from saving money, even if you’re not doing so for a specific purpose.Saving money regularly is a great habit to get into. The effect of compounding interest means that even small amounts you can save now will accumulate over time.
Before you do, however, bear in mind that as the rate you’ll pay on unsecured debt will usually be greater than the returns you get on your savings or investments, clearing your debts should be your first goal.
- Review your finances regularly
Once you’re up and running you’ll find your budgeting data will become invaluable. So, aim to keep it up to date so you’re making financial decisions based on correct information.By regularly reviewing your income and expenditure, and sticking to your spending plans, you’ll be able to stay in control of your finances and plan ahead with confidence.
Finally, make sure you back-up any spreadsheet you create regularly. It will very quickly become a document you rely on, so losing it would be a real wrench.
Get in touch
If you’d like to find out more about how we can help you take control of your finances, please get in touch.
Email info@aspirafp.co.uk or call us on 01454 632495.
Please note
The information contained in this article is based on the opinion of Titan Wealth Planning and does not constitute financial advice or a recommendation to any investment or retirement strategy.
Sources:
[1] https://www.fincap.org.uk/en/articles/key-statistics-on-uk-financial-cap…
[2] https://www.ons.gov.uk/peoplepopulationandcommunity/wellbeing/articles/h…