Good personal finance comes from fantastic organisation, a sprinkle of discipline and of course following the golden rule: spending less than you earn.
But you don’t want good personal finance do you? You want financial success! You’re a well oiled, number crunching finance guru on the hunt for opportunities that would make the bank’s savings rates quiver.
All you need is the right answers to find your way to financial freedom. And how do you find the right answers? By asking the right questions…
1. What Expenses Should I Budget for This Month?
If you haven’t done so already, make a budget! Before the start of the month you should have a pretty good idea of what will be left at the end of it. Your budget should include your regular expenses such as groceries, rent and gas but should also consider any other irregular expenses for that month.
The worst thing that can happen to a thrifty finance guru like you is getting hit with an unexpected expense to flip that budget on its head! But being a lean mean finance machine, you’re of course going to be prepared for this.
You’ll be using an essential tool; the diary. Are there any special dates or events that you’ll need to be prepared for in the coming month? Spouse’s birthday? Easter? A work party? Time to renew your website hosting? Maybe it’s coming to that point where your quarterly electricity bill is due; plan ahead and be prepared for it.
2. What Steps Can I Take to Increase my Income?
Do you have a business or a side-hustle? Then you’ll have potential customers out there, 1000s of them – you just haven’t met them yet. Find out where they are and how you can get in touch with them. It’s far too common to focus so much on detail that you forget about your sales process so be disciplined and get selling!
The truth is, we’re all super busy; we all have an endless to-do list and there’s only so many hours in a day. But take a look at that to-do list and be ruthless; which of the items on your list will directly contribute to increasing your income? If the answer is none, it may be time for you to write a new list. Brian Tracy can’t stress this idea enough; successful people focus on doing much more of the important tasks!
3. How Can I Reduce My Expenses?
With inflation, rising incomes and all of those wonderful subscription services out there it’s natural for your expenses to gradually increase over time. But you’re a finance savvy investor and you’re not going to settle for that; you should always be looking for ways to cut down your personal/business expenses where appropriate.
Get on the phone to your utility companies and see what they can do to cut your costs (Editor’s note: old O2 customers can get broadband with Sky for as low as £5 per month!). Look at your budget for the month and decide if there’s anything you can realistically cut down on; if you really fancy getting frugal, Mr. CBB has a fantastic grocery shopping challenge that you can take on to reduce your food bill. Take a look at your monthly subscriptions and decide if you still want and need them. After all, it’s not how much you earn that makes you successful, it’s how much you keep!
4. How Much Money will my Money Make?
Asset allocation is crucial to ensuring your savings/investments give you the greatest returns. To ensure your money is working hard enough, you need to be looking at two elements; where you keep it and how you spend it.
Where to Keep Your Keep Your Money
Current accounts – Unless your account provides high interest like the Santander 123 account consider only keeping what you’ll need for the month in your current account and placing the rest of your capital in savings, emergency funds or investments.
Emergency Fund – A key trait of an emergency fund is that it should be easy-access but this will most likely lower your potential rate of return. Although the emergency fund is a very important buffer you shouldn’t let it swell. Decide how much you will need in there and anything above that should be reallocated to higher return investments.
Try to work out the cash value of your monthly returns as you never know when an opportunity could come along that could give you a larger of faster rate of return. Knowing the average cash value of your return will allow you to weigh up any potential opportunities.
How You Spend It
Shopping Smart – If you’re going to spend money then you may as well be rewarded for it! Consider where you spend large portions of your money; buy in bulk, use coupons and gain loyalty points such as Clubcard/Nectar.
Credit Cards – Some credit cards provide a massive 5% return on your spending which costs you nothing providing you pay off your card in full at the end of each month. There’s a number of ways you can benefit from your spending; get creative!
5. What are my goals for the month?
Ever heard the expression; failing to plan is planning to fail? This is all too true; you can’t expect to improve your finances if you haven’t worked out where you are going and where you want to be! Lay out your plan and work out how you’re going to get there. Set realistic goals and remind yourself of them every day – the more you think about them the more likely it is you’ll take action!
These are some questions I’ve been asking myself over the past few months; stop by the Budget Breakaway Blog to read more about how they’ve worked for me!