My grandfather was an accomplished builder. So the day he handed me a brick and a trowel and asked me if I would like to build something with him, I was excited.
As an 11-year-old boy, I thought the pattern of bricks in a nearby wall looked simple enough – surely, therefore, there couldn’t be that much to it.
How wrong I was!
Managing your Money
Fast forward to the present, and I find that people (mostly men, if I am honest) have much the same view of what I now build for a living – personal budgets.
“My husband thinks he can do this himself” is a one I hear a lot.
Luckily for me, my Irish grandad was a good teacher. So good, in fact, that he eventually referred to me as a “grand little bricklayer”.
Personal budgeting is really no different. With know-how, practice and determination, anyone can become good at managing finances. This is a simple enough recipe for financial success. Skip one of these ingredients, though, and the financial budget you build might turn out to be as dodgy as my first wall!
Here are the top three reasons I come across for dodgy budgets which collapse within the first couple of weeks of the new year.
Firstly, the ‘budget builder’ underestimates the cost of day-to-day spending on all food, drink, petrol and the like – not to mention cigarettes. Monitor the money you spend on these things expenses over the course of a week – particularly on grocery shopping. That way, you can get real about the amount of living expenses you need to allow for in your budget.
Secondly, don’t forget to include the cost of birthdays, anniversaries, Valentine’s Day, Mother’s Day, Father’s Day, Christmas, Easter, Diwali or Chinese New Year. In short, all the events which are important to you. You wouldn’t forget these things in real life, so don’t overlook their associated costs in your budget.
Thirdly, not managing to capture all financial commitments in the new budget because direct debits are spread out over multiple cards and bank accounts.
This provides a great opportunity to rationalise your finances by making sure that all of your direct debits come out of a single bank account. The clarity of this new financial overview will drive savings by getting you to distinguish between financial needs and wants.
Include all of these points, and you might well have built yourself a “grand little budget.”
David Rankin is a former Bank Manager and founder of the award-winning personal budgeting service Sort My Money.