Most of us will have begun 2012 full of purpose and ambition to join the gym, revamp our diet or de-clutter the house. Whilst inhabiting this mental fervour for starting afresh, take time to give your finances an MOT.
Financial advisors are always amazed by the hazy grasp people have of their weekly and monthly expenditure versus income. It may not be rocket science but actually taking a few weeks to record exactly what you are spending, and where, is probably the most proactive step you can take towards checking your financial health. Take the time to categorise your outgoings: mortgage, utilities, socialising, food etc. This may sound a little tedious but managing your money on a day-to-day basis will lead to a healthier bank balance.
Once you have accumulated the data of your typical expenses, you can make an informed evaluation of whether your costs outstrip your wage packet. It may alarm you to find the two do not tally and you are spending above your means. If this is your reality, it is time to take some remedial action. Look at where your main splurges occur and construct a restrained but realistic budget. It is relatively simple to make small cutbacks, rein in those coffee and cake stop-offs and do just one weekly shop with a precise meal plan in mind. As the old adage goes, ‘look after the pennies and the pounds will take care of themselves;’ make several small economies on a weekly basis and you will soon witness an improvement in your financial health.
Next take a look at your bigger financial obligations. This could be mortgage repayments, credit card loans, store cards or overdraft fees. Prioritise these so that those carrying a high APR are paid off first, as these will be the most expensive in the long run. Check you have the best mortgage deal for your circumstances and whether it can be re-negotiated. Use any spare money to pay off outstanding liabilities where possible.
An evaluation of the relative strength of your financial position should also involve some planning for the future; looking at provisions for your retirement, however distant it may seem, and ascertaining that any dependents you have are provided for financially. Perhaps you may wish to research life insurance policies but, above all, it is always prudent to have an up-to-date will. Nobody likes to dwell on difficult situations but a little foresight goes a long way if the need arises. For this reason, consider if your family finances could withstand unexpected demands, or, especially relevant due to the nation’s current economic travails, a redundancy.
Resolutions to take up jogging or go on a diet may come and go but don’t let giving your finances an MOT fall by the wayside. Make use of the wealth of information available online to help you organise your finances this year.
Tags: debt, debt management, Finance