Jurg Widmer Probst – Simple steps to taking control of your finances

For many people, tackling their personal finances can seems like an overwhelming and complex task. Even without the burden of growing debts – a subject that we have looked at here in previous posts – assessing and taking control of your spending and saving is often daunting. So, we thought that we would bring together here just a few of the great strategies we have learned over the years to make the whole process a little more manageable.

Here are just a few of our ideas on how to dive in and start taking more control of your personal money today.

Keep it simple

There are lots of different tools for managing your finances out there, from apps and online budget calculators, to excel spreadsheets and even a good old pen, paper and a calculator. But before you use any of them, we’d suggest you take a big step back, and just try to think clearly about what exactly it is you’re trying to achieve.

Essentially, by managing your money more closely and engaging more proactively in your finances, you’re more than likely trying to identify where you are spending money, and then looking at how this stacks up against the money you have coming in.

Obviously, the latter should be more than the former, and it really is as simple as that – the bottom line is that in order to save and invest your cash, you need to be bringing more money into one end of the process than is going out at the other. And to assess how well you are doing this, you need to start to understand your spending patterns.

Get a grip of your spending patterns.

What do we mean by spending patterns? Well, these are simply the many different ways in which you spend your money and can generally be divided into variable and fixed costs.

For the variable costs, you could take a very simple approach to this, with some experts suggesting that you can divide up all of the money you spend into just a few basic categories – transport, food, entertainment, clothes, health, alcohol/tobacco. These categories might work for you or they might not – the point is that you find a way of categorising your variable expenditures that works for you and then assess your spending habits accordingly.

It’s a crucial first step – and one that might hold a few surprises, as you discover that you actually spend more (or maybe even less) on some things that you believed.

Assess your fixed costs

The complementary approach to this is to also look at your fixed costs. These are those outgoings like mortgages, car repayments, child care expense, insurance, utilities, broadband or even that Netflix subscription you keep renewing. They are regular and so by their nature relatively predictable – and knowing exactly what they are is your first step towards understanding a) if you really need them and b) if you do, if you’re getting the best deal.

Need, want or just ‘nice to have’?

The next stage of taking more control of your finances is probably the toughest for most people, but it can be an invigorating and liberating experience if you approach it with a positive mindset.

So, our tip is to take a piece of paper (or create a Word doc) and jot down three columns, diving up all of your expenditures into either things you need, things you want or things that are just nice to have. Be honest with yourself and be realistic, and start the process of starting to cut out the things in your life that you don’t actually require to survive.

Of course, we are not saying that this is a process of removing all those things that make your life enjoyable – rather it is a case of being realistic about what you really need in life, and how much that leaves you to spend on the extras. It’s a simple way of getting a quick and accurate ideas of where your financial priorities need to lie.

Start to engage

As with most financial issues, engaging in your personal finances early is always the best way to avoid any problems or to get them sorted out before they get to big.

So, now that you have a clear and comprehensive overview of what you’re spending (and how that matches out to your income), as well as of what areas you need to focus on, it is time to act. If your fixed costs are too high, pick up the phone to your utility provider and try and negotiate a deal, shop around for insurance quotes or finally cancel your Netflix subscription if you’re not using it.

If you’re consistently going over your personal overdraft limit to pay for food and drinks with friends, then consider either cutting back or using a credit card (although be careful to pay it off early and often to avoid interest charges).

Hopefully you should quickly begin to see an improvement in your financial health, and be able to invest any extra money you’re saving for the future.

Jurg Widmer Probst

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