Personal Finance: Get Your Budgets into Shape
Byline: Peter Axon
Do you ever have that nagging feeling that your finances aren't quite as well organised as they could be?
Most of us do. Yet getting to grips with your money needn't be a daunting task, and it's almost certain to bring rewards.
If you are alarmed by way money seems to drift out of your bank account before the month is out you need to keep closer tabs on your household overhead costs and improve your cash-flow.
Thousands of families experience the need to fine-tune their monthly budget.
Although a bank base rate of 3.5 per cent means the cheapest mortgages since 1955, this has been tempered by a corresponding fall in returns on family savings.
What's more, savings income often has to be used to plug the holes in the monthly current account statements.
But ransacking precious savings to stay afloat is not the answer.
Low interest income which is taxed at 20 per cent, and a relatively high inflation rate of 2.9 per cent means that the spending power of our savings is being eroded in all but a handful of taxed accounts.
Getting on top of our regular outgoings calls for a conscientious and consistent approach, but the process is simple.
First, set up an accounts book, or invest in a simple accounting package for your PC. You should be able to purchase the latter from only pounds 20.
Dig out all your paperwork -statements, payment plans and so-on -and then input your income and outgoings for each month of the year to arrive at your disposable income.
The next step, as with any constructive budget, is to set targets. Draw up a list of the items you want to spend your disposable income on -from groceries to savings plans and major treats -and allocate accordingly.
Remember 'rainy days' savings should be used only for unforeseen emergencies, not for bolstering the household budget -so overhauling your finances is the only real way forward.
The main reason for not taking time out to give family finances a much-needed boost is down to sheer apathy, referred to within the investment industry as 'financial inertia'. This is now costing Britons thousands of pounds every year.
By failing to stay on top of our expenses, or make adjustments to our lifestyles, we miss out on big savings that could pay for a new car or lavish holiday.
The Financial Services Authority (FSA) states that so many people do not sit down in order to see what they can recoup because they don't think it will be worth the effort. Meanwhile, careless householders are continually losing out.
Six in 10 savers do not know what rates their bank or building society is paying, and many more mistakenly believe they are being paid out just a fraction below the prevailing Bank of England base rate. This widespread ignorance means that few people bother to search for superior returns.
When it comes to your banking get a current account that works for you, rather than against you.
Changing accounts is no longer an onerous ordeal and there are some commendable deals to be had, if only you are prepared to shop around. …