Household – Guidelines To Manage Your Finances
Up to three years ago we battled to make ends meet at the end of each month. We often found ourselves dipping in to our overdraft and could not afford savings. With my husband’s full permission I did the following:
• I drew up a spreadsheet on Excel and keyed in all income and expenses which I obtained from our bank statements.
• After taking a little bit of time in analyzing each expense, I realized that we can cut down on our grocery account, as it seemed very high. I must admit, I was petrified that we will run out of food. But by monitoring our purchases very carefully, I found it very easy to stick with in the budget. Believe it or don’t, we were not overspending on food. We were really going overboard with our cleaning products!
• Next on the list was our entertainment. My husband and I both agreed that renting DVDs, dinning out and spending money on TV, etc. was unnecessary. We both work full days five days a week. We chose to spend quality time with each other after hours and to work one hour a day on earning some extra income. Sundays are a day of rest and can be DVD day. We also checked through other services we had that we weren’t making full use of, i.e.: insurances and funny car warranties, etc.. By stopping these unnecessary services we managed to save even more money. We decided to utilize this extra money towards settling our outstanding debt a little faster.
• I re-adjusted the spreadsheet and listed every account in accordance to its importance. For example: Every financial guru will tell you, that you must pay yourself every month. This is your savings. Your little nest egg. So I listed savings as priority number one and decided to pay it at 5% of our total monthly income. Once we have covered at least half of our debt, I will increase the 5% to 10 % per month. From there on I included the bond, vehicle and so on. After completing my spreadsheet and doing my math, I noticed that I am still a little short. The first month we did not save, we cleared our credit card. By doing this, we had the full credit card installment, our 5% savings and the bit of money we saved by not having to pay interest on an outstanding amount on our credit card.
• The following month I paid 5% of the month’s income in to our savings account. The extra money I had left from the credit card account I settled the previous month, was added to our overdraft, along with the agreed monthly installment. It took three months to settle the overdraft. This left us with our installment money from both the credit card and overdraft, plus no more monthly interest on these two accounts. I cancelled our overdraft facility and this meant no more overdraft fees! I split this extra money in two. 50% was added to our savings which materialized our goal of 10% savings from our full income per month and the other 50% is still being used to pay towards our vehicle. By doing this, we reduced our 60 month purchase agreement to 36 months. Next on the list is our bond.
In all honesty, I originally thought these guidelines will not work. I really thought our income was just too little. But we were pleasantly surprised. By carefully monitoring our expenses, especially when it comes to groceries and entertainment, we very often end up with extra money at the end of the month. We use this extra money for two things:
1. 50% is to buy in to opportunities or investments to increase our potential of earning extra money.
2. The other 50% is paid in to a separate account. We call this our Emergency Account. Whenever expenses such as vehicle or home maintenance or repairs crop up, we pay from this account. If we don’t have enough, we will either juggle that money from grocery or entertainment money, or we will save up in this account until we have enough. It just depends on the nature of the expense. It has happened that we needed to take money from our savings, as we needed urgent repairs to the roof. I simply increased our monthly savings to 15% for a couple of months to pay back the money we “borrowed.”
As you can see here, you really do not need to find an extra job, nor do you have to take risks in gambling or make any extra debt in order to keep your household ticking. All you really need to do is to look after your finances.