The world is full of wealthy people. Some inherited, some earned through hard work and in recent years others won it because of the numerous lotteries worldwide offering huge prizes. There is plenty of advice around for those to whom wealth is something new. Professional advisers are only too willing to offer their services. As the famous American novelist and newspaper editor, E.W. Howe once said ‘If a man has money, it is usually a sign too, that he knows how to take care of it; don’t imagine his money is easy to get simply because he has plenty of it.’ Managing money is something that presents a challenge to the wealthy but also to ordinary people who need to live within their means.
Successful companies have budgets and forecasts to monitor their performance. They adapt to changing circumstances; they certainly had to in response to the recession. While a household budget is less sophisticated it is important if for no other reason than the monthly bills can be paid.
The exercise of budgeting begins with income. If you have a fixed income each month then you have to make decisions on lifestyle and affordability. In an ideal world there should be sufficient money to pay regular monthly expenses, a little to put aside for an annual holiday and future retirement.
The exercise of simply writing down the basic figures will highlight the position. It is all too easy to spend and suddenly find there is nothing left and the paycheck is a week away. Simply using a credit card during the final days is not a good idea if a similar thing happens every month but getting an installment loan from Realistic finance is a viable option to save time and money. The balance on the credit card can become unmanageable. A budget should prevent that from happening if it is realistic and if you have the discipline to follow it. The major problems you are likely to face are all to do with spending; rarely income though you may like to think about ways to increase your earnings.
If you have never budgeted in an organized way before you may find it difficult to do an actual budget for the coming year. It is easy to forget the money that you spend on little things each day; they add up. If you have kept credit card and bank statements then you have a good starting point. You should be able to accurately predict your energy bills, the car, food etc. However you probably need to add a monthly figure for incidentals. Once you begin to follow this more disciplined way of managing your money you will soon find out how much your ‘incidentals’ are costing you each month.
Some household costs do not fit nicely into a monthly plan. Insurance tends to be annual but you must factor it in so that you have the money to pay when such things become due. You should be prepared; you do not want nasty surprises. It’s not an emergency fund though that is something worth considering in general.
Once everything is written down you may find it does not make good reading. It may be the reason why your credit card balance is continually rising. Ideally you will be able to pay off this balance completely each month, having included card expenditure in your expenses section. If the picture looks grim it is time to think about your lifestyle. Perhaps you will stop eating out so frequently, take a sandwich to work for lunch and regularly check whether you are getting the best value from your energy company, telephone provider and insurance agent. Once you begin the exercise of budgeting you will automatically find you are more conscious of money management and your spending habits. Don’t fall into the trap that William Feather, another American author describes ‘A budget tells us what we can’t afford, but it doesn’t keep us from buying it.‘