Keys to getting back control over your finances
1. Create a Budget/Financial Forecast for your life
People often associate budgeting with things you can’t have, but those who do budget know its more a question of releasing money to spend on the things you choose to have. The best way to do this is to use a spreadsheet that covers, on a month by month basis, all the income and expenditure you expect over the next 2 years. This should include annual amounts like insurances, estimates for holiday and even weekly spending money. A spreadsheet is available to help you do this which you can download by selecting here.
2. Find ways of eliminating expenditure
Make an itemised list of all the things you spend money on each month. Take a notebook with you when you go shopping. Remember to include everything including ‘impulse’ purchases, direct debits and things bought on credit cards. Now take a long hard look at all those expenses and ask yourself – do I really need them?
Remember, that every penny spent on these is money that isn’t available to spend on the things you’d really like.
3. Find ways of reducing expenditure
• Take a look at regular items of expenditure (e.g. monthly, quarterly or annual) to see if there are ways of reducing these.
Key to reducing these bills is to:
• Never accept a renewal notice without first checking you can’t get a better deal elsewhere. Remember they rely on you not bothering to change to charge you more.
• Let your existing supplier know that you are looking at other offers. Ask them what they can do to help reduce your bills
• When it comes to insurances for such things as water pipes, drains, power supply, etc. you may be better off asking your household insurance company to cover these items as well. They will often do this at a fraction of the cost of buying individual policies.
4. Never borrow on credit cards
Credit cards can be good if you use them only for the protection they offer when buying goods. However, they are one of the most expensive ways of buying goods on credit. There are far cheaper ways. If you find it hard to control your spending then get rid of them altogether. Start now and plan your strategy to get rid of those credit card balances and then cut them up. Use Debit cards instead.
5. Get rid of the credit cards and non-essential loans
Credit cards can be a monster waiting to devour your financial resources today and that could enslave you in the future, if you are not careful with them. They are one of the most expensive ways of borrowing money to buy goods.
If you find it hard to control your spending habits, then there is only one solution and that is to get rid of them. But first they must be paid off. Below is a technique that you can use that will eradicate them in the quickest and most cost effective way:
i. Use the chart you prepared earlier to identify which card has the highest APR rate.
ii. Pay more than the minimum rate on this card while still paying the minimum rate on the other cards.
iii. Keep paying the amount until the card has been cleared. The cut it up to stop you using it again.
iv. Then take the card with the next highest interest rate. In addition to the minimum monthly payment, also pay the same amount of money that you were using for the first card.
v. Repeat this cycle until all the cards have been cleared (and cut up)!
It may be that the balance on a credit card can be converted into a bank overdraft at a much lesser rate. (Don’t be tempted to go for a consolidation loan or you could end up paying more in interest charges). If you convert a card balance in this way cut up the card to stop you using it again. Having done this for credit cards you may now want to do the same for any non-essential loans.
6. Develop wise shopping habits
Don’t ever forget there is a world out there trying to get hold of your money in exchange for the least they can give back to you. Here are some key ways to achieve this:
• Use a shopping list to itemise what you need, then set an estimate for its cost and remain within it.
• Only use cash – don’t ever buy on credit
• If you can’t find what you want for free then use sites like www.ebay.co.uk - but only buy the things you plan to buy and no impulse purchases no matter what sort of bargain it may appear.
• When it comes to food buy fresh – not ready-made meals. Making your own is so much cheaper – and so much better for you. And you never know, it may be fun to do. Check out student cook-books for preparing meals on a tight budget.
• Finally, set a budget for enjoying yourself – and stick to it. If you don’t have fun then your will power to cut down on expenditure will fade and as a result so will your bank balance.
7. Maximise your income
Here are some general ways you can increase your income:
• Improve your employment prospects. You can do this by:
- Continually compare what you earn at your place of employment with what the market place pays. This will give you an idea of what your company ‘thinks’ of you.
- When you know your worth, write out your CV to an imaginary company and point out why an organisation would want to employ you. For example, what are your strengths; what are your ambitions; what skills do you bring to the company; how would they be able to improve their services/income if they employed you?
- Seek to better yourself through education – e.g. reading autobiographies of inspirational leaders, self study courses, trade magazines. Use your spare time to make yourself more ‘valuable’ in the market place. Remember, be responsible for your own future and don’t rely on other people investing in you.
- Take an interest in your company – be helpful to your boss, recommend ways of improving performance. In this way you will become more valuable and they will not want to lose you to a higher bidder.
• Use eBay to sell the things you don’t want/use anymore.
8. Save wisely
• To begin with make sure your bank account is cost effective – i.e. you are not paying for services you don’t need
• Keep a minimum balance in your current account and transfer the rest into a high interest account. Internet based banking is a great way of doing this quickly and easily.
• Be prepared for annual/abnormal expenditure. Transfer a fixed amount each month into a savings account you can use in emergencies. But only use it for this purpose Do the same for annual accounts such as household insurances. By paying for these in full you can eliminate the interest they typically add to monthly repayment options.
• Prepare now for old age
• Save regularly – ie every month. And don’t touch the money. Have a saving target in mind
9. Honour God
God uses our tithes (10% of your gross income) and offerings to fulfill His will on earth through His appointed ministers. It is our willingness to give that opens the way for God to bless us.
"Will a man rob God? Yet you rob me”. But you ask, 'How do we rob you?' "In tithes and offerings. You are under a curse-the whole nation of you-because you are robbing me. Bring the whole tithe into the storehouse, that there may be food in my house. Test me in this," says the LORD Almighty, "and see if I will not throw open the floodgates of heaven and pour out so much blessing that you will not have room enough for it. I will prevent pests from devouring your crops, and the vines in your fields will not cast their fruit," says the LORD Almighty. "Then all the nations will call you blessed, for yours will be a delightful land," says the LORD Almighty.” Malachi 3:8-12:
This last step is perhaps the most important in knowing how to control your finances. As you honour God with tithes and do good works with our offerings, God has promised to honour you. | 