Money, every choice you make, every activity you do, every change you contemplate, are in some way connected to your wealth. Yet most people rarely take the time that their financial situation deserves, to plan it effectively. You have income and you have expenditure.
The basic premise is that your income exceeds your expenditure, leaving you with disposable income. So if you keep your spending below your income, you’ll always have plenty of money left over and you’ll never have to worry about money, never have a row about money, never have money be the root cause of concern or anxiety and never need to feel guilty or otherwise about having too much or too little money. Simple right?
Not exactly. Unless you’re extremely lucky, for most of us, it just doesn’t fall conveniently into place like that. The subject of money does, in fact, get cited in a host of situations from relationship issues, employment choices, lifestyle quality and in numerous ways, your health. Anything that can lead to anxiety, depression, guilt or restrict how well you look after yourself, can be detrimental to your health. And the condition of your finances can most definitely be a major contributor in these areas.
Having too much money, it may surprise you, can also bring its share of negativity. It can be guilt when those around you are short of money. Concern that relationships may not be for the right reasons. The uncomfortable feeling that some may begrudge your wealth or success.
So what can you do differently and what can you be more aware of?
The first step in managing and planning your finances with more efficiency, is to establish where you currently are. Most people know what their income presently is, but (as 26 years of reviewing people’s finances has shown me) they are not so sure about their expenditure. They’ll know the main items, the mortgage/rent, the weekly trip to the supermarket, the mobile phone or TV subscription, but there is so much more that never gets included. Think of the last time you took €50 out of an ATM to pay €15 for something. What did the other €35 get spent on? I see people listing things like a car loan but not petrol, tax, insurance, NCT etc. I also see them list “Food” but only total the supermarket. Further questioning may reveal more spent in the butchers, smaller purchases during the week, takeaways etc. To get an accurate picture, an exercise where you keep a detailed list of spending for a month. Every single cent, noted when spent and written or keyed in that evening so it’s not forgotten.
Tips. A few basic actions that most people can do, to improve (or create!) the gap between income and expenditure:
- Examine 3 months’ banks statements and make sure you can account for every single transaction.
- Compare utility service providers to make sure you are currently getting the best value.
- Plan your shopping. Make a list and don’t shop while hungry.
- Don’t wait until the last minute to compare before you renew things like car or home insurance.
- Review premiums being paid on things like mortgage protection and life cover. You DO NOT have to only take them out with your own bank.
- Know your rights when an item is faulty and do not be fobbed off with “it’s out of warranty” (especially true with large kitchen appliances that break down after 18 months!)
Planning. Once you have a better idea of actual income and expenditure, you can plan a little more accurately. Financial planning is primarily aimed at ensuring your current, future and unexpected income remains at least sufficient for you to live on. Everybody’s circumstances are different, so it is important to consider the financial loss that would be suffered in certain eventualities.
One person may not be paid at all if out of work due to illness or injury while another may be paid for a length of time by their employer. Some may have nobody financially dependent on them while others provide for a whole family. In my own case of being diagnosed with cancer quite suddenly, having serious illness cover in place made a massive difference to our financial wellbeing. (Thankfully, I’m over 13 years clear.) Protecting your income against such eventualities and making sure that you will have sufficient income in retirement, deserves relevant attention.
In the same way that your health and wellbeing require planning, consideration and a degree of effort, so too does your wealth require planning, consideration and a degree of effort. Your health and wealth are inextricably linked. Giving each the attention they deserve, will greatly enhance your chances of being a better, all round (dare I say 360 degree!) happy and contented person.