A significant proportion of households these days owe more in debt than they own in assets. This is a problem rapidly becoming a crisis. But all that is needed to avoid joining this unfortunate group is a little self-discipline and the realization that spending foregone today will yield significantly more spending potential in future on an ongoing basis.
The aim of financial planning is to take you further along a pathway of building assets that will either grow in value, or produce a regular and growing income, or both. The first steps along this path come from taking control of your day-to-day finances. Produce detailed inventories of both income and outgoings, and do this on a regular basis, no less than monthly, and prefereably weekly.
Once you have quantified income and expenditure you can take steps to maximize your available investment capital (and hence your future financial security).
“A penny saved is a penny earned” runs the old saying. And it is very true. If you can reduce expenditure, even if your income remains flat, you have increased your investment capital. Itemize your typical weekly expenditure. Look for ways to reduce the cost. Perhaps you can walk somewhere you usually drive or use the subway for? Maybe swapping a named brand for the supermarket’s own? Or getting a take-out (or cooking yourself) instead of eating in a restaurant. How about reading the newspaper online? Having less beer or a beer-free day each week?
Carefully review your insurances. Loan protection plans are notorious for being mis-sold. If you have one, make sure that it would actually cover you in the event of losing your job – if you’re a freelance/contract worker, it may not. If you really feel you need such cover be sure to shop around to get teh best deal (provided your lender permits this).
Another “scam” is extended warranty cover on electrical goods. Most such goods are covered by a legal warranty period of a year or so. In most cases if a fault develops it will do so within this timeframe. If it doesn’t the product wil most likely go on working for many years. If you’re paying extended warranty insurance, consider cancelling it and putting the funds in a high interest savings account instead. You’ll soon have enogh to cover the cost of any necessary repairs, and if none arise you can spend the money how you please.
Check also for memberships and subscriptions that you’re not using – and cancel them! It’s easy to sign up for things you think are good, but neglect to cancel them should they prove less useful than imagined.
The best things in life are free; taking a walk, visiting a museum, re-joining the public library, spending more time with family/friends… Your circumstances are personal to you, but I’m sure we could all find some extra savings with only a little sacrifice.
However, don’t go overboard in the pursuit of economy. Without a few pleasures life would be terribly dull. Allow yourself some expenditure on luxuries. This will make your other budgetary measures much more bearable.
