Sunday, 4 January 2009

YOUR NEW YEAR MONEY MAKEOVER PART 1

In a recession, downturn in business or when facing unemployment, a lot of people think their first task is to stop spending, or to cut back drastically. Wrong! If you have money problems, be they debts or redundancy, your first task is to know exactly where you are spending your money. Get out your utility bills, phone bills, bank and credit card statements for the past year at least and work out exactly where your monthly salary goes. Recent research by Paypal has revealed that 15.9 million people in Britain regularly spend an average of £123 more per month than they earn! That's nearly £1500 per year! After 10 years of spending like that, they will be an average of £15000 in debt.
We appear to be a nation of borrowers and it is not a situation that can continue for ever. We all need to know exactly what we spend each day and writing it down - even if it's only for a few months will help us all get into the budgeting habit.
This free downloadable printable diary page will help you keep track of your daily spending and the example HERE will show you just how simply it works and then you can get started with your own. Seeing what you spend written down each week really makes you realise where your money is going - and where you can make savings.
Secondly, but most importantly, know whether you are spending more in a month than you actually bring home. That may sound silly, but I do know people who are unaware (or are ignoring the fact) that their bank account is actually just an ever-increasing overdraft! If this is the case with you, then the next step is to identify the salary gobblers - by that I mean those things that suck money out of your account every month in the form of regular direct debits, e.g. Sky subscription, gym memberships, DVD rentals, phone contract payments, charity donations, magazine subscriptions etc. If you are in debt, all those have to be got rid of - at least until you are back in the black again!
Next, be honest with yourself about your daily spending; cigarettes, take-out coffees and muffins, a pint after work, newspapers and chocolate bars can mean you are frittering away anything from £5 to £25+ a week, which could be £100 per month, £1200 per year. Cut them out! Anyway, think positive, stop eating chocolate and muffins, drinking beer and smoking and you probably won't need that gym membership!
The next step is to identify those items of expenditure you cannot do without and we're not talking clothes, iphones, lap-tops, shoes and handbags here! These are essentials like mortgage or rent payments, credit card repayments, fares to work, gas, electricity, water, sewage, council tax, car expenses and food. And this brings us to the final step - check every bill you have to pay and see how/if you can pay less for it.
Part 2 coming soon!

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