Do you earn a good income and at the end of the year ask yourself “Where did all my money go?”. I can see you sitting there nodding right now. You can take comfort in knowing that you are not alone as this is a very common puzzle for people. “Where does my money go?
So where does all your money go? Surely you can’t have spent it all …. or have you?
The trick to being successful with your money is to have control over your money. To do this you have to know where it is going. If you don’t keep an eye on it, it will run away and disappear into a black hole. There are holes in your wallets and purses that you probably just can’t image being there. You have to treat each piece of money like a piece of gold that you don’t want to let go of.
Here are some clues for you to consider so you can start to keep an eye on where your money goes
1. Try and identify what portion of your money is going on fixed expenses (such as bills and loan repayments) and what portion of your money is going on lifestyle / discretionary spending (such as groceries, entertainment, eating out, clothes)
Note down the expenses that you have to meet; such as bills, rent, mortgage payment, loan repayments etc Note down the expenses that are nice to have but aren’t absolutely critical. We will call these lifestyle / discretionary expenses (such as groceries, entertainment, eating out, clothes). How much of your money is being spent on lifestyle / discretionary expenses? (Lifestyle / discretionary spending is the area where most of the runaway money escapes from). How do your lifestyle / discretionary expenses compare to the money you are spending on fixed expenses / bills? Look for ways to reduce your lifestyle / discretionary expenses
2. Spend the time doing up a proper budget which will look at your likely future income and expenses
A budget should be a thorough record of all of your expenses across all areas such as fixed bills / commitments and lifestyle / discretionary expenses Ensure your budget is realistic and achievable Limit what you spend on lifestyle / discretionary expenses as this is optional spending and an area that you can get carried away on Allocate money in your budget for all foreseeable expenses and set some money aside for emergencies Don’t forget to provide money for items such as replacement of capital items such as buying whitegoods, repairs / renovations to your home In your budget put a portion of your money aside for savings In your budget include provision for funds to meet any goals If your budget runs into negative / deficit, then you will need to cut down your lifestyle / discretionary expenses or other optional spending until you reach at least a break even point
3. Look at your money habits
Try and identify particular times where you might be a bit frivolous
When you are in a particular mood When you have occasion to celebrate When it is someone’s birthday During particular times of the year Over festive seasons – Xmas / Easter When on holiday / away for weekends Out with certain friends / family members
Think about your pattern of spending
Do you spend first and deal with the consequences later? Do you shop around for a bargain? Do you stop and think / sleep on it overnight before rushing into a purchase? Do you ask for discounts off standard prices
4. Start to keep a record of what you are spending
Carry around a little note book and make a conscious effort to record what you spend cash / money on over a period of time Fill in your notebook on a daily basis updating it as you spend cash / money Review your notebook at the end of the day / week Keep all your receipts and dockets in one central place Use a spreadsheet to track your expenses and bills Track your total expenses over a week, fortnight, month Really keep an eye on your cash as this is what will vanish – you break into a $50 and before you know it you have coins rattling around in your wallet / purse Analyse what you have recorded and try and identify particular patterns / habits Make a particular note of any areas you are overspending Don’t stop doing this until you can say with confidence that you know where your money is going
5. Look for ways to stop the leakage such as
Following your budget Using money jars / envelopes for different expenses such as groceries, eating out, hairdressing, clothes etc Using separate bank accounts for different purposes such as bills, lifestyle, holiday, savings etc Setting up automatic transfers to distribute your pay to separate accounts for different purposes such as bills, lifestyle, holiday, savings etc Giving yourself a set allocation for lifestyle / discretionary expenses each week Being strong and if you spend all your money one week waiting it out until the following week Paying cash for items and not using credit / debt Limiting the purchases on credit cards
6. Remove access to temptations
Take the credit card from the wallet / purse Reduce the limit on the credit card Only keep minimal funds in accounts with debit card access Don’t draw out large amounts of cash and keep it in your purse / wallet Stop access to any savings account via debit cards Remove some accounts from internet banking access Have your savings account with a different bank so you can’t get internet access to it and put the money in your spending account
By: Heather A Wood
Posts Tagged Lifestyle
As a homeowner, there will always come a time when your property needs some significant work. This could be a few years after the house was built or as soon as you buy the property from a previous owner. Your main concern is bound to be how you are going to finance the work.
There are options available to finance your home repairs that mean you won’t have to make too many sacrifices in your lifestyle and personal expenses. You could look at taking out a mortgage if you own your home outright, or if you already have mortgage arrangement, you could look into a home equity loan.
If you decide to take out a mortgage, you can choose between a fixed or variable interest rate. The first is less risky as the interest rate will remain the same for the entire life of the loan. However, if interest rates are particularly high when you take out your mortgage and are likely to decrease, you might want to consider a flexible rate, which will change with shifts in the overall economy.
Think carefully about how long you are likely to remain in the property to determine the amount and loan period. If you can take a larger sum than you require for your home improvements, you can invest some for potential later repairs or improvements. Whatever mortgage you choose, your initial payments will be mainly interest, with the proportion of capital increasing as time passes. You can choose only to pay interest in the first year or two to reduce your initial outgoings.
A home equity loan will be based on the amount of capital you actually have in your home. This can be seen as the value of your home minus the capital amount you still owe on your mortgage. A lender will also look at your credit history and status. If you have sufficient equity in your home, and good credit, it should be simple to apply for a home equity loan. Interest rates are low as lenders are taking very little risk, and they believe that the home improvements the loan is financing will add to the value of the property.
You should shop around and get a number of quotes to compare when you are taking out a mortgage or home equity loan. Remember to include your regular bank, as being an existing customer can have advantages and qualify you for rates and offers you will not get with a new provider.
Although some home repair projects are unavoidable, many home improvements are not entirely essential. You should always balance how much you will be spending on a project including the interest on the loan, with the benefit you will get in terms of increased property value and quality of life. A loan may seem a large commitment, but if the home improvement project will add greatly to the value of your property the long term investment may be worth it.
By: Clinton N. Maxwell