Many people have no idea what’s going on with their money. This approach to personal finance tends to exhibit a few reliable symptoms. For one, folks like this seem to constantly be on the verge of drowning in their own poor financial choices. They’ll have good money decisions and bad ones. But because these are equally dispersed, they tend to cancel each other out. It’s a rough way to live, but it’s how most people handle their finances until they’ve started to learn the basics of sound money management.
If you’re paying close attention for the first time to the money you make and spend, you’ll start to notice that you do well at some things and not so well with others. The only way to get this kind of perspective is to make a budget. That may sound intimidating, but a well made budget doesn’t take up a whole lot of your time. It’s simply a list of all the money you bring in, and all the money you spend on this and that. It should include regular payments as well as a record of incidental payments you make for various things.
One of the things that this will reveal is what you are paying regularly. Regular payments are frequently drafted straight out of your account. There aren’t notifications, usually. This is meant to be convenient for you, a way of keeping you paid up on important things like utility bills and the like. But these days, there are so many options for subscriptions, all of which will draft your monthly payment automatically. We’re talking about entertainment, brand specific clothing, groceries, and almost anything else you can name. Many people sign up for these, use them for a month or two, then forget they ever had them. Check to see what you’re paying, and make sure that you’re using the stuff you’re paying for.
Other automatic draft payments were never intended to be purchased in the first place. I’m talking about things like PPI, or Payment Protection Insurance. Www.freeppicalculator.co.uk/ is a terrific tool to see if you have this kind of insurance. People signed up for PPI in droves over the past decade in Europe. The insurance was put into the complex language of many different loan applications, meaning that people signed up for it without realizing it on many occasions. This is the kind of thing you want to find out if you are paying, before you pay for it for months or years.
You should also check out the payments that YOU make, but without ever paying close attention. Tabulate how much you spend on coffee shops and restaurants each month. SOme people have the nasty realization that they spend more on food than they do on housing each month, and this is an unsustainable model for most. There are many insights which will reveal themselves to you if you make a good budget. So get started and figure out how to plug the leaks in your financial life.