How to Keep Out of Your Overdraft
Today marks 10 Years since the financial crisis brought upon us all as banks took excessive risks. I thought I would share something very simple, the best ideas are. Straight off the bat, credit for this idea goes to our local financial advisor, Stephen Graham
Steve came to visit to run through our finances, make improvements and find us a more competietive mortgage product. He achieved all of those things in one visit. Over a cup of tea he described the system he had used for many years to manage the family budget. No fancy App, no spreadsheet, no accounting software involved.
9 Steps to Better Finance Management
- Analyse each outgoing, is it necessary? Could you be paying less?
- Reduce costs where you can (change providers, stop unnecessary luxuries)
- Add up your outgoings
- Add up your income
- Subtract total outgoings from total income
- On a set day each week, draw that amount of money out in cash, no more
- This is the money you have available to live on
- If you an make online purchase, put that amount of cash in to next week’s pot
- Next week draw out the total minus the cash in your pot
By physically seeing the cash you have available to spend it is far easier to appreciate the reality of your financial situation. Virtual numbers in a bank account are ever-changing and difficult to visualise, it is easy to over-spend. This is a great lesson in finance management, if this was part of the school curriculum we might have far fewer people in debt.
Financial Management for Small Businesses
In business or personally, understanding your financial limits is crucial. Clearly a business cannot deal in cash, but the theory is the same. Get yourself into a position of knowing precisely the money you have to spend. So many businesses fail because they spend money they simply do not have. If you speculate to accumulate, do so wisely and do the research to know that your ‘gamble’ has a high probability of success.