Improving family finances sounds like a painful exercise. You either have to work harder to earn a bit more, or you have to cut out something you love so you can save a bit more. Neither are attractive prospects.
There is actually a third option, and that’s to figure out where you’re wasting money (or spending it on things you either don’t need or don’t love), so you can redirect it and make it work more in your favour.
Here are four tips to help you do just that:
1. Track Expenses with Simple Bookkeeping
Tracking expenses doesn’t take long or require a degree in finance or maths. You can get started with a notebook and pen, a worksheet in Excel, or accounting software if you love computer work.
Writing down what you spent in one column (along with the item you bought and how you paid), with a running bank balance total in the column next to it, cements your financial situation in your mind. You’ll never have to guess at your bank balance, so you can make better-informed decisions about spending, especially for spur of the moment purchases.
You could start a new page each week or month, depending on the number of transactions you record. There are just a couple of things to bear in mind:
- Remember to add direct debits or standing orders from your bank to your bookkeeping bank column, or it will look like there’s more available than there is.
- The more detailed you can make your spending explanations, the more information you can dig out of your accounts later.
2. Save Receipts
There’s no need to save them forever, but make sure you hang onto them until you’ve transferred the information into your notebook or whatever bookkeeping system you’re using. These days, some shops assume you don’t want your receipt for smaller purchases, so be prepared to ask for one. In the heat of the moment you probably don’t want to fish out your notebook and scribble down what you just bought, and having the receipt to hand when you get home takes off the pressure of trying to remember.
3. Analyse Your Data
After just a month or two, you’ll begin to see a spending pattern emerging, and be able to figure out exactly where money is going. This can be incredibly powerful, especially if you sometimes feel like money just vanishes, slipping through your fingers like water. It can be surprising just how much little treats like coffee with friends adds up. Another money pit might be takeaways or fuel for the car.
When you can plainly see where money’s going, it’s far easier to take control of it. It’s not about cutting out pleasures, it’s about identifying spending habits, then making informed decisions about when to buy and when to save.
4. Professional Bookkeeping
Household or personal accounting is quite simple when you have one income, pay your taxes at source and have no other investments. It gets a bit more complicated if you run a small business or have other income streams and submit a tax return.
In those instances, it’s wise to ask a professional accountant or bookkeeper how to be more efficient and keep a closer eye on your finances. An accountant can ensure you’re not paying too much tax, and see that you’re claiming all your allowable expenses.
Whether you need to cut back on spending so you can save faster or just want to get more fun out your available funds, the trick is keeping tabs on purchases and bills. When you know exactly where money is going, it’s far less likely to spring any nasty surprises on you.