5 simple financial habits to get into for 2009
January is the most rubbish month of the year. Not only do you have to go back to work, but it seems like several billion years until payday. And you may have bought half a dozen new handbags and a new plasma television in the sales, but you're living on beans and urine for the next five weeks. Congratulations.
Since you can't afford to eat, drink or be merry, you may as well put the month to good use and prepare for the year ahead. It's going to be a stinker, so you need to be as financially sound as possible. Here are five habits you need to pick up - they're very basic and brain-rottingly dull, but they'll help you survive in the coming months.
1. Know how much you're spending
Do you know to within £25, how much you spend in any given month? If the answer is no (and it probably will be) you need to find out. As a starting point, you can use something as basic as the This Is Money household budget calculator. To compare what you're spending with what you think you're spending every month, you can download a free Excel spreadsheet here. If you're still confused and think budget is something washed from the bottom of a parrot's cage, watch this intensely patronising video:
2. Be realistic about your spending
Yes, you could live on pasta and soda water for the next twelve months, but then it shouldn't come as a surprise when your toenails fall out. Budgeting is far easier when in denial, but renders any attempt to live frugally a complete waste of time. If you're a social butterfly, there's no point trying to manage with no budget for entertainment, so try eating out less than cut it out altogether. Going on holiday in the Summer? That needs to be accounted as well. Be honest with yourself - it'll probably scare the living bejesus out of you, but you'll know where you stand.
3. Reduce your spending
Once you've realised exactly how much financial excrement you're wallowing in, what can you do about it? You can start getting a better deal on your bills. You don't have to do everything at once; every time you're due to pay a bill, look at whether you can find a cheaper alternative. Keep reviewing your expenditure all the time as new deals become available, and you'll save hundreds, if not thousands of pounds a year. As an example, last night I switched my phone line rental and call package from BT to Sky (shudder) and found a better quote on my house insurance - first using Money Supermarket to find the best deal and then applying for it through Quidco for £56 cashback. In half an hour, I nipped and tucked nearly £600 off next years' household budget.
4. Start saving
I have no savings whatsoever - I'll quite happily blow a small fortune getting beer goggles fitted three or four times a month, but I've never been able to justify putting £50 a side. That's because I'm an idiot and when I need a new boiler replacing, I'll be utterly screwed. Add a line to your budget for savings and stick to it; Alliance & Leicester offer an interest rate of 5% with their eSaver Issue 2 account, as well as the best cash ISA interest rates too.
5. Review your money daily, weekly, monthly
Looking after household budgets is boring as batshit, but it's more of a neccessity than ever before. Check what money is leaving your account weekly, if not daily. If the bank is applying charges you don't understand, call them. Watch your direct debits and standing orders; if you can see you're going to be short in a few days time, talk to the bank; arranging a temporary overdraft could potentially save you from a month of fees and other bogus nonsense. At the end of every month, review what you've spent against your budgets; if you're pissing money up the wall, you need to stop it or cut expenditure elsewhere. Yes, it's dull as ditchwater but all of it is vital if you're going to look after yourself and your family.