Money Management Tristan on 04 Jun 2009 10:55 am
When I worked as a mortgage broker I dealt with a broad cross section of society on a daily basis, some professionals, some civil servants and teachers and quite a few tradesmen.
Now you would think that the more educated the clients were the better they would be with their personal finances, not so. What I discovered whilst dealing with the various clients I dealt with was that some people just seem to have a natural instinct for personal finances, and others seemed to need a helping hand.
The lesson I tried to instil in all of my clients that fell into this latter category was the importance of budgeting. This seemed quite alien to some of them, and it was only when I went through their monthly income and outgoings, to create a monthly budget for them that they realised why they were so often getting into debt.
By preparing a family budget, where you know exactly what your necessary outgoings (mortgage/rent, utilities, insurance, food, petrol/diesel) are each month allows you to then see what you have left over each month to spend and save.
If you only vaguely know how much you have on a week-by-week or monthly basis to spend, then it’s very easy to overspend, or worse if you have overestimated, get into debt on a credit card or overdraft.
If you can work out your family budget well for the month, and know exactly how much money you have to spend, then you can avoid going into debt, and it’s this that is the key to budgeting. I helped many clients realise that the reason they were getting into debt each month was that they were overspending on unnecessary items, such as expensive mobile phone contracts, over priced insurance, expensive utilities, expensive sky tv or cable, and generally spending a lot of money shopping at the supermarket.
By helping these people to understand their budget, they were able to make cuts that saved them money each month which they could then spend guilt free, knowing that they were now not getting into debt because they had made a family budget, and most importantly were sticking to it!