Take Control Of Your Finances
6 January 2021
It’s a New Year and what better way to start off than to review your financial situation. This is especially important with the uncertainty we all continue to face in the current Covid climate. Many people might feel that they do this on an ongoing basis, which is all well and good. However, it is hard to beat sitting down at least once a year and taking stock properly by writing it all down, and January is as good a time as any to budget for the year ahead.
This can seem daunting to someone who is not used to preparing a budget, wondering where to start and how to go about it?
Start by thinking who this budget applies to. If you have a family, you may wish to include them in the planning process. In this case, consider all household income, spending and other commitments. By getting everyone’s input you can ensure a comprehensive plan and talk to them regularly about the family’s spending and whether the budget is going to plan. That way, everyone knows where they stand and you can manage expectations.
If you share your home with a partner, you will likely have some shared expenses such as paying bills but you may still wish to budget separately. In this case, you could consider opening a joint account to manage your shared household expenses and make a budget separately yourself.
Some tips for budget planning:
- It is a good idea to prepare your budget based on the frequency of your largest source of income, so if you get paid monthly, operate your budget on a monthly basis.
- Be honest, don’t overestimate or underestimate your income or expenditure.
- It is fairly easy to account for recurrent expenses but don’t forget to include expenses that may not occur as regularly, such as an NCT on your car or the TV licence.
- Review the budget regularly and adjust if needed so it continues to be realistic and gives you a true reflection of what you can expect. Again, given the strange times we are living in, you may need to adjust your income to the Pandemic payment short term or make some other amendments based on your changing situation. However, by doing this exercise, it will keep you right and make you aware early if you need to cut back on some discretionary spending to compensate.
If you have money left over after reviewing your financial situation for one year, think about how it can be used most effectively, for example, paying off your loans early. Start with those on the highest interest rates first, usually Credit Cards. If you do not have debts consider opening a savings account to help you reach future goals. When you have a goal, you will find it easier to stick to a budget.
If you have a budget you are less likely to succumb to random spending, as you will be aware of whether you can really afford it or not. You will know where your money is going which provides a sense of control and in turn, can make you happier and more relaxed. It can help you to avoid or address debt problems, prepare for emergencies, save money and achieve your future goals.
Lisa Loughrey QFA RPA is a Qualified Financial Advisor and Retirement Planning Advisor. You can contact her through John F. Loughrey Financial Services by telephone on 074 9124002 or e-mail on firstname.lastname@example.org.