You should review your financial situation at least once a year. This will show you:
l how much you are earning
l how much you are spending
l what you are spending your money on.
A review will give you a better understanding of your financial circumstances and you may notice areas that you would like to change. Use a budget planner to help you work out your income and spending.
If you don’t have details of your day-to-day or one-off expenses, make a rough estimate based on your bank and credit card statements and bills.
Don’t overestimate or underestimate your income and spending as this will affect you in the next stages - when you are planning your goals and budgeting.
Identify your goals
When you have done your financial health check, you may be surprised by what you spend most money on, and what your lifestyle is costing you. But, if you have a clear idea of what you want now and in the future, you can make changes to help you achieve what you want.
To help you identify your goals, ask yourself the following questions:
l What do I want? You may want to pay off a loan or buy a new car, to begin saving for your children’s education or to put some extra money away for your retirement or a combination of some or all of the above.
l How long will it take? Your goals can be short, medium or long-term. Be realistic and look at the cost and how affordable it is to reach your goals within the time you want.
l How much will it cost? Work out the overall cost first. Then break this down to monthly or weekly costs as this will give you a better idea of the actual cost and how affordable it is.
l How do I start? You need an action plan to help you reach your goals. For example, you may need to start a regular savings plan, or cut back on some spending so that you can pay extra off a loan and clear it more quickly. Talk to a professional to see what your best options are.
Make a budget and keep to it
The most reliable way to manage your money is to make a realistic budget and stick to it. A budget is a plan of how much money you get and what you spend it on. Budgeting helps you to save, manage loans and avoid debt problems.
Before you draw up a budget, you should consider who it is for. Is the budget for you or is it also taking other people into account? If you have a family or share your home with a partner, you should take into account all household income, spending and other commitments.
Budgeting can help you to:
l handle your money better and deal with unexpected events
l see where your money is going
l choose to reduce or increase your spending on certain things
l spend your money on what’s more important to you
l avoid getting into debt.
Tips to help you manage your budget
The total of all your expenses should not be more than your total income at any stage. Otherwise, you will need to revise your budget so that you don’t fall behind on essential bills and expenses. This will involve either spending less or earning more.
If you need to free up some extra cash, cut back on non-essential items first. But don’t stop spending money on luxuries completely. If your budget is too tight, you may not stick to it.
Shop around before you buy to help you save your money. If you reduce everything by a small amount, it will add up. Budget accounts, offered by some banks and credit unions, can help you spread out the cost of your bills over the year. Instead of paying different amounts each month, you have one set payment. These accounts also make sure that you pay your bills on time.
You should talk regularly to your partner or family about how you are doing with your budget. Check how much closer you are to achieving your goals. Also keep in regular contact with your Accountant or Financial Advisor.
If you fail, don’t be discouraged. Start again. It can take time to adjust to a new spending pattern. You may also find you need to change your budget a few times before you get it right.