With Easter just around the corner, now is the perfect time to have a little financial spring cleaning session. There is plenty of 2016 left to go, and plenty of changes you can make. We all know about all those clever little money-saving tips – so I’m not going to go over them here. The internet is a wonderful place – and it abounds with great advice on saving money – so if you’re not already reducing your outgoings, then there are plenty of posts on this site to get you started – with Money Saving Myth-Busting being as good a place to start as any.
If you’re equipped with money-saving wisdom, great! Now is the time to take things to the next level…
Draw up your financial inventory
Work out your net monthly income from all sources. It’s a beautiful number – but sadly the cost of living is going to eat right into like a hungry person taking bites out of a burger at lunchtime. So let’s just write the number down, in big bold letters at the top of the page, and leave it there for now.
There’s a surprising amount of things that will reduce this number. So take a deep breath and write down every single one of them – and their cost. The list will include stuff like the following:
- Accommodation (rent or mortgage) plus associated costs for upkeep
- Travel (car or public transport)
- Clothing
- Credit card bills/any other repayments
- Phone and broadband
- Food
- Kids
- Pets
- Entertainment
- And so on…
Subtract this from the net income. Hopefully we still have a number that doesn’t have a minus sign before it.
What we now have is a rough figure of what’s left. But it’s only a rough one, because life is full of unexpected expenses, which is why we need a contingency element to add to our inventory.
Define a workable contingency figure
Okay, so you may suddenly need dental implants or have to get work done on the house. It’s all too easy just to put hope and wishful thinking into the equation here, but sadly all that will do is make the output murky and unworkable. So take your outgoings figure and add a percentage to it. Make sure it’s one that’s realistic, and you can then have a financial buffer every month. Put it into savings and it may even grow – especially if you have a quiet few months when the car doesn’t break down, the plumber didn’t need called out, and the dentist’s waiting room is one of the places you didn’t need to spend any time.
Balancing the two numbers
We now have two important numbers – estimated monthly expenditure and what’s left. If there’s anything left, well lucky you! Spend or save it wisely. The one I’m interested in is the estimated monthly expenditure figure and how to slim it down a little.
There may be more ways than you think. If you’re renting, then buying is a better option long term and may be more affordable than many assume. Check your rent against what your likely mortgage repayments would be (you can do that on provider sites like this) – and plan accordingly if it looks like a possibility. Even if it doesn’t, you can always speak to providers and see what they say. It doesn’t hurt to ask.
Credit cards – you may be able to move to a new deal. Always, always check out this option. And always aim to end the month with credit card debt reduced. The interest isn’t cheap, so tackling debt has to be a big focus.
Telecommunications. There are usually ways to get reductions in your monthly bills here. Old contracts are often more expensive than new ones, so don’t be shy about finding out if your provider has other deals available – they’ll want to keep you on as a customer, and in some cases they may even throw in a few extras too.
Putting it all together
Don’t be daunted by overhauling your finances. Break the job down into steps and deal with everything one step at a time. Set achievable goals and stick to them. And by next Spring, you may well have sprung to a whole new level of financial savvy.