Dare to Get your Finances into Shape

With all of the glum economics forecasts for 2011, many people have decided to stop letting things slide and to try and take back control of their finances. Sounds easy, but the truth is that unless you are in a wonderfully secure and well paid job, getting into good financial shape takes more than just good intentions; it takes planning, forethought – and some not always pleasant actions.

One of the first things you should do is identify exactly where your money is going. Do you know how much you are spending on entertainment, transport, bank charges, and credit card interest? You would be surprised at how many people don’t keep a record of their expenditure – or even fully check transactions on their bank account or credit cards. Don’t be one of them. It is only by learning where your money is going that you can plan and then take realistic steps to curb overspending.

Many people spend their ‘folding’ cash and then ‘top up’ by making additional purchases – or worse – withdraw cash on a credit card to tide them over until pay day. This is a very expensive way to get money. While a credit card is safer to carry than cash, they also cost more to use. In fact, many people feel that because of interest charges a credit card notches up each month, they should carry a health warning akin to those on a pack of cigarettes, “Government Warning, indiscriminate use of this card and paying back only the minimum monthly amount can cause serious damage to you financial health”. 

Many years ago, Charles Dickens wrote that, “Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery”. This may or may not hold as true today as it did back in 1849, because, put simply, in today harsh financial climate you are thought to be living beyond your means if you can not save at least 10% of your yearly income. Depending upon which financial guru you listen to, everyone should have between 6 and 10 months worth of wages saved as an emergency fund – ready in case they loose their main income source; Do you?

What actions can you realistically perform to get into good financial shape?

For a start, don’t use your credit cards unless you absolutely must. Also, if you can, pay off credit debts as quickly as possible. Increasing your monthly payback to more than the ‘minimum’ monthly payment has a big effect. Even managing to pay a couple of percentage points above the minimum each month makes a big difference in how much you pay overall – and how long you keep paying out.

Don’t just say you have to curb spending, do something about it, but be realistic. While it sounds noble – and sensible – to state that you will stop smoking or stop dining out, people who make such severe cuts to their expenses often end up quickly depressed. This often leads to spending to try and feel better. So, rather than putting yourself ‘cold turkey’ and suffering what may be severe hardship, a far better method is to think of lots of small saving you can make. If a journey is only a block or two, consider walking rather than taking the car. Try some supermarket brands rather than brand names, try a cheaper coffee shop, have a cheap muffin rather than an expensive apple-filled donut. There are literally thousands of small saving you can make in your day-to-day expenses that won’t cause you too much hardship – but will lead to big savings.    

Set yourself realistic financial targets for each month or salary period, and spend time and effort in making some small savings. It can make a world of difference to your financial well being and all it takes is a little forethought and effort.

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