We all need money to survive and this is even more prominent when owning your own business. Planning what to do with your money, and how best to manage it, is so important for several reasons. Here are a few:
- It makes it easier for you to keep track of your money and general financial situation without making it too complicated or time-consuming.
- You won’t be tempted to stick your head in the sand, by having it all laid out in front of you, clearly and concisely, you can avoid getting any nasty big surprises.
- Hopefully it will also avoid the stress of getting to the end of each month and wondering where all your money has gone.
- It will help reduce the build-up of piles of paper because you’ll regularly sort and file your paperwork.
- You’re less likely to forget to pay bills and lose important documents because you’ll have procedures in place and places to securely store paperwork.
- You can easily see how much money you’ve got to work with and, if you’re in debt, come up with a plan to pay it off.
STEP-BY-STEP GUIDE TO SIMPLIFYING YOUR FINANCES
Step #1 – Pick a time to go through things
Choose a time to sit down and go through your finances when you’re least likely to be interrupted.
Step #2 – Your income
Make a list of all your monthly income. The list doesn’t need to be anything fancy. A spreadsheet is good, but a written list on a sheet of paper works just fine. Remember to include all your income otherwise you’ll be working on inaccurate figures.
Step #3 – Your outgoings
Now look at your outgoings and everything that you spend money on during the month.
Once again go through your bank statements and make a note of all the money that goes out of your account. You’ll probably want to look at the last 12-month period in case you have anything that goes out annually in case it hasn’t appeared in a recent statement. Again, work out what these equate to on a monthly basis even if you only pay them annually.
Also include how much you spend on childcare, after school activities, food, clothes and general living expenses. Look at any extra subscriptions you have going out and make sure you include these.
Step #4 – Calculate how much you’ve got left each month
Work out how much your monthly income and outgoings come to and you’ll be able to see whether you’re in the red at the end of each month, whether you’ve got enough to live on and any extra that’s still left over.
Step #5 – Consider extras like savings, pensions etc
If your budget allows, try to put a little bit aside each month into a savings pot. You can also think about a private pension, life insurance and any other extras if you’ve got some money to spare at the end of each month.
Step #6 – Compare and switch where necessary
Be aware that if you have credit cards or loans, you’re probably being charged quite high interest rates. It’s worth shopping around to see if you can get a better deal and take advantage of any balance transfer offers which mean you’ll pay less or no interest for an initial period of time.
It’s also worth taking the time to compare home and vehicle insurances with other providers to see if you can get a better deal and save yourself some money.
Step #7 – Budgeting your money
If money is tight, set yourself a monthly budget for each of your main outgoings. Try not to spend more than you’ve allocated for each budget area.
Remember that this is all about simplifying and making it easier to manage your finances. For many people, money can be a scary subject so don’t try to do anything that’s going to make it even more off-putting for you!
Step #8 – Making it easier to manage your money
The next step is to make managing your money that bit easier and simpler.
Firstly, cancel any monthly payments that you no longer need (yet another gym membership anyone?!).
Set up direct debits to pay as many bills as possible online. This will avoid the chance of you forgetting to pay something.
Switch to paperless statements to prevent the build-up of paper bills if you’re not too good at filing them.
Pay bills promptly and file any paper statements you do still receive in an organised way in a secure storage cabinet or drawer.
Allocate a different folder or divider for each of your accounts or services and label each one clearly in a secure cabinet, box or drawer.