How personal accounts can save you money
Businesses keep track of their finances by keeping accounts; either on paper or on a computer. You can do the same to keep track of your personal finances and see exactly where all the money goes. You need to do a balance sheet that lists all your assets and liabilities and a income and expenditure account to see what money is coming in and going out. Then you can work on saving money and getting better value.
On you balance sheet on the right side list all you assets, the things you own. The biggest asset will probably be your house, if you own it. Then the car and other things. Doing a balance sheet won’t tell you very much to begin with, but when you do one in a year’s time it will tell you a lot, if you compare the two balance sheets. Your house may have gone up in value a little, but everything else has probably depreciated. How much did your car depreciate? That can be expensive and wipe out the value of anything you have added to your balance sheet in the last 12 months. You have to measure your assets in monetary terms, but with inflation money actually goes down in value. If your balance sheet shows you have less net assets this year than last when you add the inflation rate, you are actually worse off not better off. Don’t forget to include the value of things like pensions and life insurance.
You can also do a income and expenditure statement, just like a business. Listing all the money you have coming in and going out. If you have more coming in than going out then you have a surplus or profit, if more is going out than coming in you have a deficit, just like many governments. You can’t print money like governments, but you can make cuts.
At the top of your list of outgoings is probably housing and in the UK council tax. This is usually difficult to cut in the short-term. But how about the long-term? Could you save money in the long-term by moving to somewhere smaller?
There will be lots of essentials like food on your list. Can you spend less on food? Most people can. You might decide to eat out a little less, buy own brands instead of well-known brands, cut the amount of alcohol that you buy or just buy less junk when you’re in the supermarket.
Energy is a big expense and adding lots of home insulation to your balance sheet could increase the value of your home and see the energy costs on your income and expenditure statement reduce.
Check what you’re spending on clothes. Can that be reduced? Do you really need the latest fashions? Can you shop at a different store? Can you avoid the higher prices that stores with ‘interest free credit’ charge? Can you make your clothes last longer by looking after them?
Technology is another expense and we spend a lot on television, telecommunications, computers and recorded video and music. Can you cut that down? Maybe buy an unlocked phone and have a GiffGaff sim, rather than paying out on a contract? If you need to save money, could you cancel the cable and make do with Freeview? Do you really need to buy CD’s and DVD’s?
The car is a big expense for most people and you can keep track of how much it costs to run with your accounts. How much is the depreciation? How much fuel do you use? Can your shop around and save on insurance? Can you drive more frugally to save on petrol? Can you do fewer miles to save on fuel?
You might also find a lot of your money goes in fees and interest to banks and that is poor value for you money. Maybe you can cut back on some things and pay off debt, to get those under control.
If you can cut spending by just 10% on each item, that would mean an average saving of over 2,000 pounds a year for most families in the UK. If you put 2,000 a year into Zopa for 5 years, you would have a tidy nest egg at the end of the 5 years. That would give you much-needed financial security.
There are more blogs over on a zillion ideas today, why not check them out.