Financial management is the smartest way to ensure your personal and business finances don’t get out of hand. In a sensitive economy it pays to plan ahead with your finances, have back-ups and make sure you get yourself out of the rut that can lead to debt.
List It All
Before you begin your first step for financial management, write down your personal income or the amount your business expects to bring in on a monthly basis on one list. Then make another list of all of your expenses. You’ll need to grab your bank statements in order to do this so you can compare dollar for dollar. Compare the two lists and go from there – if there isn’t anything left and you’re in deficit, you’re probably living off your credit cards and need to pull back on that first. Read on below on the steps to take.
Living off Credit Cards
Your first step for financial management is often the hardest to make – stop living in debt on your credit cards. Understandably, many people need credit cards to be able to function financially in today’s world, and there’s nothing wrong with that. The problems come when things get out of hand, you start spending more than you think you’re spending and debt starts to accrue. This becomes a further issue when you are penalised with interest owing on your credit cards, leading to more and more debt.
Get a Charge Card Instead
Many people have lived in debt on their credit cards for several years, and see it as a normal way to function financially. This is not true – and you don’t need to get rid of the credit card system you’re so used to either. Find a bank which offers a charge card, which must be paid in full each month. This means you’ll avoid just paying the minimum, and will learn how to only spend what you’re bringing in. You still have a month’s lenience so you can purchase things before you have the money, but you can only spend the amounts that you know you’ll be able to pay back within the month. In doing this, you avoid high revolving interest and are able to keep your monthly spending in control.
Charge cards also work for business and corporate situations, giving your business a way to scrutinise every expense with highly detailed reporting. You can apply for a business charge card online and manage your business’ money easily with liability options and easy online account management tools.
Read Bank Statements Regularly
It is important to read your bank statements carefully each month – don’t just throw them away with the weekly circulars. Not only is having monthly run-down of your account action important for paying credit card and card charge bills back, but it’s also important to make sure there aren’t any mistakes.
Make sure there are no strange or miscellaneous charges from your bank on your statement. By tracking fees, you’ll discover if your bank is charging you unnecessarily, and how you can make changes in the future. Situations where this can happen include maintenance fees, teller withdrawal charges, annual fees, cheque fees and so on. If you approach your bank looking for ways to get around these charges, you’ll probably find there are many ways you can change your accounts to avoid them.
Additionally, read your statements regularly with particular attention to the surcharges you are paying. Wondering what all of those $1 ATM surcharges are? They are the fees you incur when you use another bank’s ATM. Stick with only those of your bank and those surcharges will disappear – but not unless you don’t notice they’re on your account statement!
Give Yourself Cash
While electronic card purchases are essential for large buys, keep your incidental day-to-day spending limited by only using cash. Set yourself a limited amount of money for purchases such as your daily lunch, drinks after work, extracurricular activities and so on. Get that amount out in cash and don’t let yourself pay electronically for any of those kinds of purchases for the week. You’ll find having real, tangible money means you limit yourself when you need to (or risk going without for a few days), and you won’t incur the surprises when you find out you’ve spent way over budget on morning coffees.
Reward Yourself
If you consolidate all of your purchases to one source like a charge card, which you have to pay off in full each month, you’ll avoid high revolving interest and kick start your financial management into the right gear. Also remember to take part in rewards systems if you’re going to do all of your spending on one card, as you’ll be able to use your points to buy everyday things that would come out of your normal budget – even down to paying for things like your annual card fees. This is also great for businesses who can pay their expenses with their charge card, then earn points to buy things that you’d need to buy for your business anyway such as corporate gifts and day-to-day sundries.