Thursday, 30 June 2011

Be brave,take control of your finances -DIY

The last time I felt personal concern over the nations' and my own finances was the summer of 2008, when the current depressed economic cycle began.
As I noted in my first post on this blog, in the UK all families will struggle as disposable income falls. A further quoted article seems to back this up.


If market forces are shaping and controlling my spending power, then have a go at stepping to one side and looking at what it is that you can do to affect this situation.
I have posted on the following subjects:

  •  Water consumption;
  • Managing household inventory;
  • Managing your food intake;
  • Managing unnecessary expenditure;
  • Managing motoring costs.
  • Checking tax codes/entitlements.
If you take on board some of my (not new) ideas, then hopefully you will save some money, without too much alteration to your lifestyle. Thus, releasing cash and potentially nullifying the effects of the disposable income crisis.
So, this post is about reviewing your financial status.
I regularly review my families' nett worth. This may not be simple for every body, but if you learn to manage every expenditure then it is easier each time you do it.
My methods are simple, pen and paper, not a convoluted spread sheet. I look at every document with the latest valuation and write it down. e.g.
  • All,outgoings, from any bank statements;
  • Larger spend not on direct debit, i.e. car insurance, car tax etc.;
  • Assumed monthly spend;
  • Assumed household spend on clothes,shopping,schooling,travel and any other expense.
It pays to be absolutely realistic as under estimating gives a false sense of money going out. Even though it may be a shock, write it down.
(This list should give you your outgoings, which is a great time to clear out any unnecessary elements such as 'dead' direct debits or standing orders - gym membership not used, breakdown insurance duplicated, other non-essentials)
Then look at your income:
  • Income, from bank statements:
  • Salary or wages;
  • Tax benefits/child benefits;
  • Other sources.
If then you annualise your spend and take it to a monthly figure then you should easily know your status, outgoings versus income. This gives you and your family the residual disposable income.
It is quite a surprise when the figures are calculated, and more satisfying when you work it out yourself.
I believe if this figure is shared with those directly affected, i.e. partner,family members etc, then every one shares the burden of managing the household finances.
I have a simplistic view on finances, borne out of my early years experiences, thus if I can't afford it, I don't buy it..
Thanks for reading
http://earlyretirementextreme.com/cash-flow-diagrams-for-the-poor-the-middle-class-and-the-investor-class.html#comment-22997
http://www.telegraph.co.uk/finance/economics/8604128/Bank-of-England-split-on-interest-rate-policy-as-consumers-struggle.html'Office for National Statistics (ONS) revealed that families are under greater pressure than at any time in the past 34 years. Real disposable incomes in the first quarter of the year fell 2.7pc compared with 2010, the ONS said, as inflation outstripped wage growth. '
This sort of report spurs me on to challenge the policy makers and the way in which we are enslaved to the salary model. (see ERE)

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