You’ve probably thought about making your business more resilient, and about making yourself more resilient. But have you thought about making your personal finances more resilient?
It’s easy to do but does require a mindshift change. The biggest thing you can do to ensure this is to spend less than you earn.
I didn’t say it was rocket science but it’s easier said than done if you don’t know where your money goes to in the first place> Here are some tips to get you started:
1. Sit down with your bank statements and get an idea of where your money goes. If you have a lot of cash withdrawals just note those down at the start so you’ve got an idea of how much you take out monthly. You’ll need to go back and look at how you spend this cash.
2. Make a list of all your direct debits, standing orders and regular bills – a spreadsheet is great to record this. Think about one-offs that you have to pay for each year (like car servicing, MOTs). Can you divide this by 12 (or by the number of months you have until you have to pay it) to give you an idea of how much you need to put aside each month?
3. Remember to put a contingency in for things that might go wrong (like your washing machine breaking down).
4. Have a look at all your outgoings, including your cash withdrawals, and see if you spend less than you earn. If you spend more look at what you can cut down on. Several years ago I stopped buying lunches and coffees and took a packed lunch to work. I reckon that alone saved me more than £100 per month. When I gave up alcohol for a year I saved £000’s! Could you change utility or telephone/internet supplier? You’ll be surprised how you can easily save money monthly.
5. Now look at your debt. How much debt do you have and what are the interest rates you’re paying? Is it worthwhile transferring to a 0% credit card or consolidating with a cheaper loan? If you do spend less money than you earn look at how quickly you can pay off your debts, it could save you a lot of money in interest. Don’t use your credit cards unless you pay them off each month. Got an unexpected bill you’ve not managed to save for? Can you transfer the balance to a cheaper rate (or 0%) credit card later?
6. I also put in a budget for other things too, like clothes, holidays, gifts and save this monthly in a separate account. If you’re currently spending more than you earn then you’ll need to make some savings to your expenditure before you can think of doing this. I’ve also got a set amount of ‘good-time’ money I can spend each month.
7. Be sensible about your money, for example If you earn say £10 an hour but you’re currently paying someone £20 an hour to cut your grass. Then it would be more economical for you to work less hours (and pay less tax) and cut your own grass!
When you start to see that you have money in the bank each month and you’re out of overdraft it’s a great feeling to have. If a bill comes out of the blue you have the money in the bank to pay for it. Imagine going on holiday knowing you don’t have to live like a pauper for the next few months to pay back your credit card. That’s the meaning of true financial resilience!