If your finances have taken a bit of a battering over recent months, you’re certainly not alone. Belt tightening has almost become a national pastime. One we hope won’t go on for too much longer.
On the positive side, it’s first class motivation for finally sitting down and sorting out your money: where’s it coming from, where’s it going, and how you can keep hold of it a bit longer, after all your family are your most important asset and taking good care of your finances should rank high on your list.
No Complicated Tech Needed
It doesn’t come much simpler than a pen and notebook. Armed with a recent bank statement (one for each of your accounts if you have more than one bank account) you can start right now getting to grips with spending and saving. Unless you’re a whizz at mental arithmetic, a calculator might come in handy too.
Of course, there’s nothing to stop you firing up the computer and opening a spreadsheet if that’s how you like getting things done. But, if you use a small notebook you can carry it around with you and jot down purchases as you make them.
Whichever method you choose, you’ll need five columns with these headers for the information they’ll contain:
- Date: The date the transaction took place. It might be a cash or debit card purchase or a direct debit or standing order. If you run a credit card, make a separate sheet for this, then note down the repayments to that card on this main sheet that’s tallying your main bank account.
- Item: What you bought, be it grocery shopping or coffee and cake with friends.
- Income: Record where income came from. Salary, for example.
- Cost: How much was it?
- Balance: At the very top of this column, write your current bank balance from your up-to-date bank statement. Now each time you make a purchase, subtract the amount from the current balance and write the new balance in the column. When you’re recording income, add it to the balance.
You can have a new page every week or create a fresh page at the start of every month. Write your bank balance from the previous month or week at the top of your balance column to get started. Don’t forget to add direct debits or it’s easy to think your running balance is bigger than it is.
Deal with Debts
Debts can cost you a lot of money over time, and that means that you can’t treat your family as much as you would like, or more importantly, save for a rainy day, so it’s important that you do what you can to get them under control. You could do this by accessing a personal loan from Plenti, which you can then use to consolidate your debts; you could use the snowball method to gain momentum and get debts under control, or you may need help from a professional debt counsellor, but the worst thing you can do, if you have a lot of debt, is to keep paying the minimum and hoping for the best.
Save Your Receipts
Unless you’re running a business, you don’t have to keep them forever. Just hold onto them until you’ve copied the amounts and dates into your notebook or spreadsheet.
If you keep them all, you can avoid filling in your finance columns every day, although it’s a good idea to do a daily check so you always know where you stand.
When you start a new sheet, double check your figures against your bank statement. Make corrections if you’ve missed any transactions so your new starting balance is accurate. Once you get into the swing of it, it only takes a couple of minutes to update.
Analyse Your Finances
After a couple of months, you’ll have built up a good picture of daily and weekly spending, and find you’re getting to grips with accounting without even trying too hard.
To start your analysis, look for recurring entries, or categories of spending if you prefer. Examples might be how often you do top-up grocery shopping, how much you’re spending online, or motoring expenses. It can be quite eye-opening and empowering when you stop and notice how all the little spends are adding up.
Having a simple record like this puts you in total control. You can see where you’re spending a lot and spot areas where it won’t be too painful to cut back. It’ll also reveal how much you could save, making it easier to put money away for luxuries or special events coming up.
At its fundamental basics, this simple system is the heart of all types of accounting – seeing a picture of where money is coming from and where it’s being spent so you can direct it into more profitable or prudent channels.
Far from being boring or scary, it can be energising and empowering. If you find you enjoy watching money and want to take a deeper dive into accounting as a career, or so you understand how to run profitable business finances, you’ll find courses in colleges across the island of Ireland, and even online.