Do you usually find you have very little money left in your account towards the end of the month? If so, then what you need now is a long-term plan. Find out how to draw one up and discover an invaluable tip how to cut costs here.
Some people are better than others at managing their personal budgets. This is either because they have more or less money at their disposal or because they are simply not keeping track of what they are spending. Which usually results in very little money being left in their account or even plunges them (deep) into overdraft territory.
That is nothing to be ashamed of, but it can prove rather expensive in the long run. So anyone who is constantly dipping into their overdraft should definitely look into alternatives. After all, interest charged on overdrafts can be anything up to 14 percent. One alternative might be to switch to an instalment loan, which have far lower interest rates. Which in turn can help people to get out of the red more quickly.
When money is in short supply every month, a long-term plan is the key to breaking the cycle. And the first step towards developing a plan is to pinpoint where your money is going. In other words, you need to make a list of your income and expenditure. And not just for the past month but for the past three months. This is because variable costs in particular can fluctuate to a great extent. You will find all you need to know about income, fixed costs and variable costs here.
First step: Compare your expenditure and income so you can see how much you would need to save in order for your money to last for the whole month, or for you to build up some sort of financial cushion. Such as that all-important rainy-day fund. Or so you can finally start to put money aside for your later years.
Second step: Find out exactly what you are spending your money on. But also what you are spending most of your money on. This will help you identify the greatest potential for saving your hard-earned cash. Or, as the old expression goes, if you look after the pennies, the pounds will look after themselves.
Check your account outgoings, receipts, etc., and make a list of them. You can do this in the old-school analogue way or digitally in our user-friendly app. As each of our account models includes the budget book feature, you can see right away where your money is going. Including for all the months to come, which means you no longer lose track of your finances. If you have an account with us and prefer the analogue approach, now is the right time to take advantage of the budget book feature so you can set the wheels in motion as soon as possible.
Once you know the difference between your income and expenditure and where the bulk of your money is going, you can start making some smart changes. This doesn’t automatically mean depriving yourself of all non-essentials, but rather finding smart alternatives instead. These range from bigger considerations (“Do I really need a car?”) to switching to tap water rather than buying bottled and making your coffee-to-go yourself at home. All of which would be better for the environment as well, which is a great thing.
Let’s take a simple example to illustrate the importance of what we might feel to be minor changes:
Spending €3.50 on a coffee every weekday morning adds up to a hefty €70 a month. And a grand total of €840 per year, assuming that you buy a cup of coffee five days a week for 12 months. Which is a whole lot of money for (below par) coffee.
Here’s a great tip that will really help you keep track of what you are spending: rather than looking at regular expenditures per day, per week or even per month, calculate how much they amount to for the entire year. Then even the smallest amounts will soon add up significantly. And if you spend €7 on lunch five times a week, that amounts to €1,680 a year. But if you save that kind of money, you could treat yourself to some pretty good holidays instead, save money for a rainy day or use it to invest! Much more appealing, don’t you think?
But you don’t have to cut out everything you enjoy. Every little helps and nothing needs to change radically overnight. Why not take a look at your list of things that you don’t really need but that give you pleasure and see what they cost per year? And then consider whether they are so much fun that you don’t want to do without them. If you don’t, that’s fine. But perhaps there are other things that you could cross off the list.
The most important thing is to set the ball rolling and to start making changes gradually. However, taking a long hard look at fixed costs is every bit as important as adjusting variable costs. After all, there is usually quite a lot of scope there as well. This also involves taking a closer look at any ongoing contracts you may have.
So check your fixed costs as well. Is it possible to get cheaper green electricity, internet and mobile phone contracts? Do I actually go to the gym or am I just too lazy to cancel my membership? There are so many ways you can tighten up your finances.
It’s also worth having a look at how you can increase the amount of money coming into your account. Do you have stuff you don’t need that is worth selling? Have you already been thinking about asking for a raise at work for some time now? When it comes to sorting out your finances, two levers are always better than one.
So what are you waiting for? Compare your income and expenditure, identify the biggest variable cost items, check all the contracts that make up your fixed costs and look for alternatives. That may sound like hard work, but you’ll soon find it’s well worth the effort.
More useful money-saving tips can be found here.